The SUV-driving, McMansion-owning US lumpenconsumer had his day in the sun, and now its over.
The message is clear- the USA needs to stop using less oil or fight for it. Memos have been quietly exchanged around the world, and devaluing the USD is a highly defensible way to bring about demand destruction in the world larges economy.
I'm suprised that he didn't cut by 50bp. Paulson must have told him that he was ok with a 25bp this time, gave him a lollipop, patted his head, and sent him on his way.
The dollar goes down and oil goes up. Good analysis above concerning effort to reduce US oil demand. We are pieces on a big chess board and we are about to be sacrificed.
The Fed's stated worrying about inflation is about as believable as Paulson's statement that the US favors a strong dollar. Actions speak louder than words, and their actions show that they don't care about inflation or a strong dollar.
It seems odd that when the day has good news like we're not in recession, the FED only cuts 25. I'm starting to think all the goverment news releases are orchestrated in advance. If the FED was planning on cutting 50, GDP would have been reported as negative.
I don't think the FED can cut anything larger then 25 going forward for fear of running out of ammo too quickly.
ha, really? .6 percent gdp growth... well weeee-doggie...
bet the numbers were in part inflated by the financial "industry's" creation of exotic financial instruments that have little to do with the REAL economy.
we are watching the planned, deliberate systematic destruction of the dollar.
If oil hits 200 by Christmas, it's going to have to do most of that between election day and christmas.
There is no way a republican is going to get elected president if oil is at $175 on election day.
Actually, I guess the republicans and democrats in congress are now going to have to join hands and start spending more and more to prop up the economy until election day...none of the incumbents want to be voted out on a wave of massive anger.
That penultimate paragraph sounds like an ending to a story to me. Also the language about inflation sounds more ardent lately.
"The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability."
They have signaled that they will now pause for eight weeks, until the next meeting, before cutting again.
Seriously, how many chances does the Fed get to PLEASE the market by not cutting. This was it, and they took a pass. That means the commodities rally can continue without Fed interference.
I don't like the statement is seems to day "it could be black it could be white its whatever you think". The Fed needed to take a stand and show confidence that it believes the market has improved. It declined to state.
Mish had a good article several days ago questioning why the gvmt would be filling the strategic petroleum reserve with oil at +$100.00. Maybe they plan to invade Iran before Bush leaves office to lower the price.
Wait, I thought Iraq was supposed to provide oil for rebuilding their country and fueling ours with $0.29/gallon gas. Where is that damn red pill.....
TNX now nose dive. Flight to safty again ? after TEDSPREAD has been moderating for a week - it spiking up since 2:15... Now at 1.48 after visiting 1.38 today
May Day tomorrow? Is this market going down? Ben took the punch bowl away but said its not safe to go home. Worse and weakest FED statement in the past year.
There is no way a republican is going to get elected president if oil is at $175 on election day.
Most americans don't give a rats tush about the price of the raw product. The do see (and feel) the impact of the pump price. Keep one eye on the strategic reserve once hurricane season is in full swing (conveniently just before the elections).
Quote from the blog of a soldier who just returned from Iraq a few days ago (and has been away from the pump for an extended period)... Gas is crazy expensive
Did you actually parse that? When the Fed references past actions in a statement like that, it tends to mean a turning point.
Sorry to disappoint all the nihilists, glod bugs, and fiat fans, but the rate cuts are done unless something catastrophic happens. Now since I've said that, you can proceed...
money has been manufactured out of thin air by IBs and others who in the creation of exotic, on and off book securities and investment schemes have bilked the system.
along with the limited and necessary bailouts must come prosecutions, fines and taxes to recover the ill-gotten gains or our system is f^(K#D
as woody Guthrie said
Some men will rob you with a six-gun,
And some with a fountain pen.
Respectfully, I don't think the Fed knows anything that we don't or can't reasonably deduce.
Sebastian | 04.30.08 - 2:51 pm | #
oh yeah...
they know, (and you don't) what was in the toxic brew of Bear Sterns investments that they vouched for to the tune of 29 billion dollars potentially, of the taxpayers money.
they also know what crap is being accepted at the PDCF and TSLF windows...and you don't, and neither do i.
Did you actually parse that? When the Fed references past actions in a statement like that, it tends to mean a turning point.
"... will continue ..."
"... will act ..."
Those are not words that indicate an ending. Those are words that indicate a story that has not yet reached its climax.
Namecall all you want ipodius, but you predicted no rate cut and were proven wrong. Forgive me if I take your predictions about future rate cuts with a grain of salt.
TIO looks to add another $3.2 B to the slosh, that will take it over $70 B - total slosh is $282 B today, on the pace it has been over the last week that is +$300 B slosh tomorrow...anyone know what the all time highs are for TIO and total slosh?
(doesn't count the 4 letter money pumps - TSLF or PDCF)
If you compare the current FOMC statement to the March 18th statement (previous meeting), it appears the Fed is signaling a pause.
On March 18th, from the FOMC statement (emphasis added):
"Todays policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will act in a timely manner as needed to promote sustainable economic growth and price stability."
"The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability."
It appears the Fed believes the downside risks to growth have diminished and the inflation concerns remain about the same.
""I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.", Grover Norquist
(these are the kinds of guys helped gut regulation and create this crisis.)
sebstian...just when i think you can't possibly say anything more inane than anything you have said before you go right ahead and out do yourself.
Sebastian wrote:
"Actually, you're right. I should have said "I don't think the Fed knows anything useful that we don't or can't reasonably deduce."
Sebastian | 04.30.08 - 3:09 pm | #
As expected the Fed cut the Fed Funds rate again today. Below is the current statement and the March 18th statement by paragraph, with my commentary interspersed.
The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 2 percent.
The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 2-1/4 percent.
We started this round of interest rate cuts back in mid September at 5.25%. Thus in a little more than six months short term rates have more than been cut in half. It seems likely that this is the last cut for a while. Monetary policy works with long lag times, and at best we should only be starting to feel the effects of the first interest rate cuts now.
Recent information indicates that economic activity remains weak. Household and business spending has been subdued and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters.
Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softened. Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.
Not too much difference here, except a change in the tense from has weakened further to remains weak. This implies that rather than heading down the economy is bumping along the bottom. However last time around they just mentioned weak consumer spending, but this time they added that business spending has been weak as well. The first sentence is marginally more hawkish than the equivalent statement six weeks ago, the second statement is marginally more dovish. Net-net it looks like a wash. Note that there was no change in the statement about the stress on the Financial markets. Given that the last meeting was right at the time of Bear Sterns almost going under, perhaps the most systemically stressful time in the last half century, the lack of change in this part of the statement is interesting.
Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully.
Inflation has been elevated, and some indicators of inflation expectations have risen. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully.
They are crossing their fingers and praying that inflation does not get out of hand. The Fed has been looking for energy and commodity prices to stabilize or retreat for a while now, and it has yet to materialize (well the last two days have seen energy prices retreat a bit). The idea behind looking at core measures of inflation is that food and energy prices are more volatile than overall inflation, but that over time they are similar. That has not been the case at all over the last five years. Perhaps its time to junk the whole idea of core inflation.
The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.
Todays policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will act in a timely manner as needed to promote sustainable economic growth and price stability.
They took out the reference to downside risks to growth remaining. This makes the statement far more hawkish. Clearly they do not want to have to cut again. This is most likely the last cut for a long time. The argument will soon move to if the Fed should be raising interest rates to tame inflation and help support the dollar. Of course there are still downside risks to growth, but the upside risks to inflation are becoming more worrisome (uncertainty about the inflation outlook remains high).
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Gary H. Stern; and Kevin M. Warsh. Voting against were Richard W. Fisher and Charles I. Plosser, who preferred no change in the target for the federal funds rate at this meeting.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Gary H. Stern; and Kevin M. Warsh. Voting against were Richard W. Fisher and Charles I. Plosser, who preferred less aggressive action at this meeting.
Most of the time there are no dissents in the Fed policy statements, having 2 members object is very unusual. Fisher and Plosser both disagreed again, for the second meeting in a row. They are clearly more worried about the inflation situation than the rest of the Fed.
In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 2-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Cleveland, Atlanta, and San Francisco.
In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 2-1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, and San Francisco.
As usual, they brought the discount rate down along with the Fed funds rate.
The Fed is like a doctor faced with a patient with two problems, he has cancer (inflation) but is having a heart attack (Financial markets seizing up). Even though the heart medicine is known to speed the spreading of tumors, you have to give it to the patient or he will die in the emergency room. It looks like the heart condition has stabilized, although the patient is still very weak and short of breath. This is the last dose of the heart medicine. Soon the patient is going to have to start chemo, or the cancer will get out of hand. Right now the Fed is hoping for divine intervention (moderating prices for energy and other commodities) to make the tumors go away. Its not likely to happen, and the Fed knows it. However, if they start the chemo to early, it will cause another heart attack. Look for no change in the Fed Funds rate for the next few meetings and then for the Fed to start cautiously raising the Fed Funds rate in 25 basis point increments.
Is it any wonder Americans can't save a plug nickel. You CAN'T spend hedonic improvements. Hedonics actually remove spendable cash from consumers. Cash accounting is more suited for consumers than accrual accounting. Consumers can't put their hedonically imputed gains in a level 3 account and borrow against them.
The savings rate plummeted in conjunction with the implementation of the BOSKIN nonsense.
Still lots of room for lower rates with The Positive Inflation Model!
The market has recovered from a brief dip following inline data this morning. Trade is deferring to FOMC and they will likely to defer to data. So the circuitous loop will continue but not until the Fed has delivered another 25 basis points of easier money and a likely bias to pause at the Jun meeting.
I don't know how willing they are to lend to each other, but the banks sure are willing to tap out the consumer. Just got a call from C (well, to be precise, an outsourced representative working the night shift in India) urging me to let them send me a check for the amount of available credit on the card I have with them. The pitch was that the interest rate on the advance would be 0% for six months, plus some not-quite-understandable-because-spoken -way-too-quickly disclaimer of fees.
I assume this is a way of maximizing fee income--between use of the card between now and the clearing of the check, plus the fees, most people who accept the offer would be over their credit limit as soon as the check hit the account. This was a common ploy a few years ago for the fly-by-night secured-card operators; now Citi is reduced to this?
Whatever...it's obvious they don't mind having as many customers as possible drawing their lines to the maximum. I can see why the bankruptcy bill was such a priority for these guys....
mock turtle said: "sebastian...just when i think you can't possibly say anything more inane than anything you have said before you go right ahead and out do yourself..."
Well, think about it. I've been saying "no recession" for over a year, even before any of us knew anything about the problems Bear Stearns was having, for example.
Yet with all the emergency Fed "bail out" activity...no recession.
I keep trying to point out that when making economic forecasts one has to look at the whole picture, but...
but the rate cuts are done unless something catastrophic happens [Ipodius]
Ohhhh, I can't resist. Edit to read "unless something catastrophic [is created]" and the election will be, ahem, postponed. (Although, I have to admit, Bush seems ready to be done with the "hard, hard work" like, yesterday.)
I cannot believe inflation is contained at all. Whatever the figures say, people feel it every day at the gas pump and at the supermarket and lots of other places too. Pretty soon, if the government begins to tell people inflation is "contained" they are going to think the government lies. Of course it does, all the time, about a lot of things. Up to now, people didn't think it lied about the economy. But...
Looks like hedgies are trying to orchestrate a hot money redirect out of the US.
If they're successful the dollar carry trade will pick up steam and the global economy will continue disintegrating in this vast ocean of easy money the Japan and the US have created.
Totally disagree. There's too much emphasis still on the economy weakening further as the opening sentence. If there was to be a strong liklihood for a pause, they would not have lead off with such a strong statement of a weakening economy.
Interesting Times said: "Sebastian - you may be right on the government's faux definition of a recession.
But my definition includes PPP (Purchasing Power Parity) and Quality of Life.
That has been nothing but negative for the last year."
I don't think I'm going to "win" the recession argument based on semantics. Once it's all said and done, I think there will clearly be no recession.
My experiences over the past year with "purchasing power parity and quality of life" do not match yours and things are actually looking better for me, even though I'm just a middle-class boomer like so many tens of millions of others.
Just got a call from C (well, to be precise, an outsourced representative working the night shift in India) urging me to let them send me a check for the amount of available credit on the card I have with them. [Yalt]
I don't know, sounds scammish to me. Did they ask for your credit card number?!
CapitalOne is reducing credit limits on folks with excellent credit ratings, heard on the teevee this morning.
Either way it does not matter. If you hold than eauity markets will ask for more cuts. If you lower than the dollar will weaken and eventually hurt equities anyways with higher inflation.
My experiences over the past year with "purchasing power parity and quality of life" do not match yours and things are actually looking better for me, even though I'm just a middle-class boomer like so many tens of millions of others.
Sebastian
Sebastian | 04.30.08 - 3:41 pm | #
I don't know, sounds scammish to me. Did they ask for your credit card number?!
No. Agree--that's always my first thought on these calls. Maybe I just didn't let them get that far into the script, but you'd think they'd try to get there before the mark decided he had better things to do (a point I reached in about a tenth of a second).
I'm paying 4 bucks for gas. 3.50 would be a blessing right now. That EWZ ETF is a play on commodities, not really a bet on Brazil. It doesn't hut that Brazil has budget surpluses though.
I don't see a particular message being communicated in the wording. I see wishful thinking in both the comments on the slowdown and on inflation. I think they cannot signal what they do not know.
CR, you're great with charts and forecasts, but reading FOMC cryptic messages, maybe not so much
"Importantly, policy makers didn't indicate in their statement, as many on Wall Street had expected, plans to halt this current cycle of rate cuts. Only two policy makers dissented, calling for no change in interest rates.
[The market expected something hawkish toward further rate cuts -- the Fed didn't do that. They just kind of moderated what they were saying about the economy," Schrader said. "This rate cut leaves questions as to whether there may be some further economic pain going forward.]
Only SOME indicators of inflation expectations are causing concern. Only some? Er.... I'd love to see which of your inflation expectation indicators are NOT causing concern? bwahahahahahahahahaha.....
Repeat after me... Iraq has WMDs, Inflation is contained, No recession...
Let's talk about inflation indicators. Import prices rose at the fastest pace EVER recently - over 12%. PPI is running at almost 7% yoy. CPI rose at over 4% in 2007 and was accelerating at year end.
The fed doesn't care about inflation. The fed only wants you to believe they care about inflation.
I agree, a Vocker policy at this point would plunge the economy into disaster. The Fed had to take a stand in Sept 07 when instead of playing up to the market. Now everyone expects a bailout (banks, homeowners,homebuilders, airlines, car makers). The inflation bill that would result would get is one that the US treasury and the World cannot afford. Dark days ahead.
FED would look at inflation expectations Vs unemployment.
they say that "resource utilization" will be down - which mean they expect unemployment to rise and wage inflation not to spike.
all in all this is the most confusing FOMC minutes I have read. I thin they don't have any idea - except the few lurking problem they know all too well.
Borrow dollar at let us say 2% and invest in Euro fixed rate at let us say 4%.
You get 2% interest difference here which your profit. In addition to it if dollar looses value against Euro, then you get exchange rate gain since the borrowed money is immd converted to Euro which is appreciating as time progress.
That doesn't really make sense to me (for today's action). Why aren't commodities going ballistic too then?
The FED's action today showed that they are a dog with no teeth. People are showing a vote of no confidence in the leadership attached to the dollar. There is too much uncertainty as to where the dollar will go.
Why save? Buy land, buy anything that when you drop it on your foot you say ouch. Don't buy any wallstreet BS, paper or pomposity. There can be no value preservation or rainy day funds. Flush everything back into they system and get it back to work, or die! This running fullspeed on an accelerated conveyor, sucks!
Better yet, increase your survivability skills, ability to tolerate pain-deprivation-suffering and enlarge your adaptability because the situation on the ground is gonna be dicey.
Namecall all you want ipodius, but you predicted no rate cut and were proven wrong. Forgive me if I take your predictions about future rate cuts with a grain of salt.
What I said was that the Fed will pause, and if they don't they will only cut .25. I also said (in a gentleman's bet with another poster) that the lowest the rate would go is 2.0%, back when everyone here was screaming they'd cut to zero. I also said glod's rise was over (back when it was over 1000) and i see now that it is under 870. I also said shallow but long on recession. Is there something else you'd like to bring up about what I've said? I've also said that the Dow would see 11,200 for a low. I'm still waiting for that, and perhaps I'm bearish on that. But we still have the summer to go.
ac,
If you have a moment, could you outline how a DOLLAR-based carry trade would work versus the Yen carry trade or provide a link?
Thanks.
I assume it would be pretty simple - borrow in dollars at 2% convert to foreign currency by selling the dollars and buying the foreign currency (e.g. the Brazilian real where interest rates are something like 11.75%). This drives the dollar down and the foreign currency up. Then you can buy foreign assets (e.g. Brazilian stocks or bonds) and make money on the appreciating currency and the assets you purchased.
As I understand it this is the basics of how most cross-border carry trades work.
The reason it's fundamentally irrational is that the higher interest rates in the foreign countries are generally intended to offset currency depreciation. The carry trade however causes the target currency to be artificially elevated (as described above) thus giving you the higher interest rate in real terms, not just nominal terms...
That is until the end where the currency violently collapses (e.g. Iceland).
That doesn't really make sense to me (for today's action). Why aren't commodities going ballistic too then?
The FED's action today showed that they are a dog with no teeth. People are showing a vote of no confidence in the leadership attached to the dollar. There is too much uncertainty as to where the dollar will go.
Couldn't agree more.
IMO words from the Fed (or anyone else for that matter) are meaningless.
I'll believe they're going to stop cutting rates when they stop cutting rates.
Short term profit taking in the commodity as well temporary speculation winding down in case the economy is really slowing drastically.
You dont want to get caught commodity bubble when the economy is shrinking at faster rate.
Does anyone have any data on how much is borrowed to fill the gas tank? Because, the people who borrow to fill the tank may not borrow that much when the gas price goes down. This will translate into GDP contraction.
Oh and also I said Trichet will have no choice but to lower the ECB rate before the end of the year, perhaps as early as Q3, as growth pressures trumped inflation concern.
And I'll add that I was in agreement with mp and conjure that financials had seen the worst, although at the time I was not buying and conjure was very selectively. That has changed, as I am now selectively.
mock turtle said: "I'm waiting for you to accept or decline my challenge"
Pardon my language, but your challenge is bullshit. The problem is that the bearish losers never simply admit that they're wrong.
I've been screaming "no recession" here every quarter since Q1 2007, every quarter there's not a recession, and the bears are always making excuses. It's always going to be the next quarter, or inflation is understated, the government is lying or whatever.
One poster just today called me the dumbest son of a bitch on the planet, for being right!
Weird action on S&P 500 futures last night: at 9 p.m. Pacific, there were contracts on 1.4 million mini contracts, at +3.5. I had never seen that before. 1.4 million is about the volume that we see during the course of 24 hours.
Today, the volume in S&P 500 futures purchases is about 3X what it has been these last few weeks.
Someone feared a big, ugly reaction this morning, and someone is trying very hard to keep the market up, now.
You can't do carry trade with all currencies. Most of the emerging economies has parital conversion system with strings attached to it.
Generally you do currency carry of one developed countries currency with another developed countries currency since all developed countries allow 100% currency conversion.
The Fed would like to hold rates here for a while and see how the stimulus package and the lagged effect of all the rate cuts plays out. The statement is fairly wishy washy because the Fed has spent the past two months getting a more thorough understanding of the holdings of the investment and large commercial banks, and I would have to imagine what they found doesn't make for a sound night's sleep.
One poster just today called me the dumbest son of a bitch on the planet, for being right!
What do you expect Sebastian? When the facts don't fit the reality, we have to change them...and then these are the same people that accuse the government of doing the same thing. It's pretty funny if you think about it. So far, you have been far more on the money than any posting on this thread, and I gave you kudos for it in an earlier thread. I was pretty sure that number would have been slightly negative or even less positive but you were closer.
I think the trick is to bring no political theory to looking at the data. Here, there is a pre-notion that some sort of disaster has to happen because we are on the wrong track, yet as time passes no disaster happens. Perhaps the people on the wrong track are the ones that keep calling the disaster quarter after quarter and should adapt their methodology.
Couldn't agree more. The FED has to sound hawkish, but not hawkish enough to scare to market, but nor can they say they risk credibility and say things will get batter. The Fed wants it all
The government gets to come up with silly numbers like PCE deflator, imputed rent = housing services, etc. Companies have to report hard numbers (mostly). I know which numbers that I place greater credence in.
Just got a call from C (well, to be precise, an outsourced representative working the night shift in India) urging me to let them send me a check for the amount of available credit on the card I have with them. The pitch was that the interest rate on the advance would be 0% for six months, plus some not-quite-understandable-because-spoken -way-too-quickly disclaimer of fees.
I get those several times a month (the printed checks). Tear them up into little pieces as fast as they arrive. Someone at C really wants people to borrow.
Companies in emerging countries use currency borrow trade (however you may call it).
For example, The interest rate in India is around 9% per anum. Instead of borrowing within India, the company will borrow Yen from Japan at 1% then convert the Yen to Dollar before bringing dollar back to India for their expansion.
Roughly around 20B-40B worth of money has been borrowed by indian companies in the past few years for their expansion.
So keep an eye on indian stock market when Yen strengthens to 85/S.
Most here aren't predicting disaster. But there is a lot of outrage over senseless bubbles and bailouts. Personally, I think the prudent are indeed being fleeced to bailout banks and speculators.
I'm also deeply worried that an inflationary fed is trashing the lower four income quintiles.
On a per capita basis, the US has been in recession for two consecutive quarters now - gdp growth less than population growth. It may not be an "official" recession, but the economic circumstances of the median individual in the US economy have been declining since late last year, which is probably why 80% of the population correctly believes we are in a recession (as per consumer sentiment surveys), even if artificially low gdp inflator numbers prevent it from becoming "official."
Another misleading point in the GDP report is that it measures Jan-March in aggregate and does not show that the economy weakened as the months wore on. If a measure was take from Feb-April Im sure we see a negative GDp
Just wait 9 months. I am confident that the new administration will have no difficulty identifying the start (and end) of any recession well within the confines of the Bush Administration.
I like Sebastian's comments. He is rational and at times spot on. Even though I don't necessarily agree with his commentary, he seems to have a pretty good grasp of what Wall Street is "thinking".
I was bullish until about 18 months ago and have been in the "bears" camp ever since the fall of 2006 (especially in regards to housing).
Even though it "feels" like a recession, it doesn't mean we are officially "in the middle" of one. That is all Wall Street seems to care about.........
I am confident that the new administration will have no difficulty identifying the start (and end) of any recession well within the confines of the Bush Administration.
Agree. It probably will also be concurrent with the filling of the Strategic Petroleum Oil Reserve and worsening conditions in Iraq.
Hey mock, remember my friends think i'm an uber-bear i think seb is more towards the bull camp than i am, but still he's right about no recession...yet. and he was close on the call so i think he deserves a shout-out on that.
i try not to politicize my financial musings too much, and call the data trends as i see them. i'm sure i'll win no friends on my DOW low, and i'm in the recession camp but with shallow and long. the interesting thing is that since globalization is bigger and the dollar is in the crapper, we're seeing earnings reflect that. that is both good and bad. and, btw, the dollar i think has seen its low but will bump along for a while longer.
angry, i hear you on the lower quintiles. i'm not sure that has anything to do with the fed in particular, and as i've said i'm very saddened at the FC patterns around here since they are in the lower-income areas. as to the solution, i'm not clear.
I think inflation is killing the middle class. The fed can end inflation at any time.
Also, if globaliztion prevents incomes from rising then we should lower inflation or even allow deflation of CPI goods. This method worked for over 100 year in America.
That's it indeed. The easing cycle is done and the FED will start raising rates towards fall or winter. The crisis (if you want to call it one) is over. We should all enjoy our life and seek to improve ourselves rather than pointing at the FED's or other leaders faults.
Although I'm currently short the market (!), I will probably go long late this week or on Monday. This is a very bullish market reaction. A sell-off after the FED announcement tends to be followed by strong uptrends two weeks out (after another day or two of sell-off).
ac, Isn't some of that interest to cover the market risk of the host country as well?
Yeah, I think it's a combination of depreciation and risk from instability. The point is the interest rate is higher for a reason. Hot money flows send torrents of money into these economies without pricing in the risk. In fact they tend to do the opposite -- they price out the risk and then go one step further and invert it.
In Ben Bernanke's Hot Money Universe higher risk is a positive; lower risk is a negative.
We have a weird hybridized mutancy of an economy. Actions by central banks in station 5 panic mode. Pulling all the stops on information manipulation, currency devaluation, debt & distress hiding. While the underlying market has gains indicative of a healthy, substantial productive economy (NOT). The only optimistic news has been the Fed manipulations and innovations and earnings where increase was attributed to greater marketability abroad due to currency plunge. Those are not longterm signals of robustness. Rather like the glee a terminal patient has when it hurts just a little less than yesterday and a rose in the cheeks today. Long term this economy has far more diseased cells than healthy. Cancer is cancer -- deluding yourself that it isn't, isn't a cure!
Wages aren't rising, House prices aren't rising. The 'inflation' is price increases. Yes, this combination decreases your standard of living - get used to it.
The Fed's hope is that the commodities prices rises are mainly speculative, hoarding or temporary shortages and that without wage increases and with a sagging economy they cannot be sustained. Wishful, hopeful... whatever. Maybe the Fed is due for one break in this whole mess.
FWIW: On further reflection, I don't think this was a scam. They knew my credit limit and outstanding balance to the penny (I just called the automated Citi line to confirm the balance). If they could get that information, I'm guessing they could tap my credit on their own without my help.
Or maybe I'm just not cynical enough, and there's an angle I haven't thought of yet.
I have been preparing for a recession since Jul 2007 in our company. Trimming down excess costs, letting go of non-performers etc. Just because this blog has some people who are forseeing what is coming doesnt mean they're totally wrong and you are totally right. Even a non-interventionist economy has many moving parts and TIME is an important contextual measure. This is a consumer led recession compounded by an inflationary environment and is different than previous business recessions. If posters here continue to be wrong over the next 3 quarters, I will be the first to congratulate you. Better yet, I hope you are right and that we avoid a recession. Unfortunately I dont think you are.
Here's the money clause in the government's "real" GDP report.
The price index for gross domestic purchases, which measures prices paid by U.S. residents,
increased 3.5 percent in the first quarter, compared with an increase of 3.7 percent in the fourth.
Excluding food and energy prices, the price index for gross domestic purchases increased 2.2 percent in
the first quarter, compared with an increase of 2.3 percent in the fourth. About 0.3 percentage point of
the first-quarter increase in the index was accounted for by the pay raise for federal civilian and military
personnel, which is treated as an increase in the prices of employee services purchased by the federal
government.
So if you accept that then ok - real GDP grew by 0.6%. If you think inflation is higher (I suggest you read and subscribe to http://www.shadowstats.com) then we had a contraction. Personally our business did see a slowdown from Q1 of 2007 in terms of sales but by being proactive in planning we were able to keep our profitability at same or slightly better levels.
Of real concern to me are Food prices in 2008. Many, many people are going to suffer. If you have never had the opportunity to starve or fast for a couple of days - I recommend you try it immediately. Its good for your soul.
Commodity price increases are definitely being influenced by speculation & hoarding. But some of that is well founded. We have negative real interest rates, a 150 billion stimulus package, never ending wars, massive federal deficit spending and bailout plans being proposed on a daily basis.
I won't even mention the trillions in unfunded future liabilities.
Paulson: 'We're closer to end' of credit crunch
4:38 PM ET, Apr 30, 2008
02. Paulson continues to urge financial firms to raise capital
4:37 PM ET, Apr 30, 2008
03. Paulson sees 'more bumps in road' for financial markets
4:36 PM ET, Apr 30, 2008
I've been screaming "no recession" here every quarter since Q1 2007, every quarter there's not a recession, and the bears are always making excuses. It's always going to be the next quarter, or inflation is understated, the government is lying or whatever.
One poster just today called me the dumbest son of a bitch on the planet, for being right!
CD it looks like he is trying to cover all bases as well as his butt. Warn people without causing panic and keeping his "credibility" intact. He in esssence did a "Bernanke"
Until the Fed signals a pause in the growth of M3 the rest is just more lipstick and a new dress for Mortcia.
IMO the inflation expectations pig has passed through the snake and is running wild. Bernanke has said that expectations not actual inflation were his concern. The grocery and gas station are winning the minds of the populace.
Your comment about the Fed was truly wacko. Yet you neither defended it, nor retracted it. So why get so indignant about how you are treated here?"
Because he's a troll. Never forget that.
He may or may not believe what he's saying, but it's really all about keeping the argument going. And when that's your top priority, the validity of the argument is secondary.
Just wait 9 months. I am confident that the new administration will have no difficulty identifying the start (and end) of any recession well within the confines of the Bush Administration.
giacutter | 04.30.08 - 4:19 pm | #
Sort of like Bush did with the last recession, which incidentally started according to the NBER 2 months AFTER he took office.
Seb,
It's good to have you here..I disagree with your take but it's always good to look everyway possible before moving thru a stop sign, even straight ahead..
that's the first time I've seen mp not zen like! of course maybe he's tired of fed, sec, irs, govt, white house, rating companies due everything possible to ruin the future of our youth.
I've noticed more & more companies blaming their earnings shortfalls on rising prices. Just wait for the clamor when workers start losing their jobs due to inflation.
"The point is the interest rate is higher for a reason. Hot money flows send torrents of money into these economies without pricing in the risk. In fact they tend to do the opposite -- they price out the risk and then go one step further and invert it"
Agreed, we don't have the only casino on the strip.
I'd like to nominate this post as top5 of the week.
byzantine_ruins writes:
Pardon me while I do this. I don't know if this is too much troll feeding.
My point is, it seems that those who predicted a Q1'08 recession are questioning the GDP calculation now but not before.
Modern Republican-style arguing technique:
Make a bold assertion that takes 10 seconds but forces your enemy to riffle through reams of minutia to "prove" that you were wrong.
The best part is, the person making the assertion gets to grade your results, and the grade is always failing.
You are automatically on the defensive and they have to concede to validate you. So for phase 2, when an answer is produced, move the goalposts in some fashion, or attack your enemy as "obviously justifying" because they produce an answer that is given in anything but precise, prescient foreknowledge of your question.
GDP calculation has never been perfect, even Econ101 students know that.
When you must concede, minimize the degree to which it matters. Yes, everyone knows its imprecise. Why is it imprecise? Because of political pressure. Also taught in Econ 101.
Let's not talk about that, though, let's just talk about how it's no big deal that you are in essence conceding the central point so you can prove him "wrong" when you assay whatever minutia is presented to you.
But the timing and the people who question the calculation (like Roubini) is definitely making me raise the red flag.
Another GOPer technique. Blame instantly, usually in a way that seems to taint the individuals. If possible, bring up some known past moral shortcoming or other mistake. If not possible, just use a condescending tone as if their failures are well known, and make sure you name someone who your allies know has been singled out as an enemy of the Movement.
In answer, we're not questioning it -- any more than you conceded we are correct to as people who got through Econ 101 or the equivalent professional experience.
The deflator was manipulated to conceal crucial commodity inflation, which was done to flatter the administration. You admit everyone who knows anything about this knows it happens. Tell me again how we are going out on a limb here, you-who-are-swift-with-accusations, I must have missed it during the rhetorical slight of hand.
The fact is, I think that inflation has been under-reported all along. It was concealed during the boom to mask the fact that this run-up didn't just fall out of the sky like a freshly-minted similie. Growth has been over-reported as real prices have been spiraling upwards for years now. It is concealed now to keep real growth positive.
It's unfortunate that most of you GOPer-types use these tactics. You have too much interest in the argument, not enough interest in the facts.
This is pose to you: 2.6% real inflation. Let's stop arguing about notional lacks-of-argument in the past, and you start explaining to me that you think the real economy I am experiencing on a day to day basis is experiencing only a 2.6% annual price climb. Bring out some data sets that show we are wrong and these data are reliable under these circumstances. After you have put some shoeleather in and created whole and concrete arguments, maybe someone will refute you.
byzantine_ruins | Homepage | 04.30.08 - 11:15 am |
Manufacturing execs downright gloomy about coming year. Barely one in ten upbeat about the U.S. economy
April 29, 2008
(Reuters)U.S. manufacturers are much more pessimistic about the U.S. economy and the direction of their businesses than they were three months ago, according to a quarterly survey of senior industrial executives released Tuesday.
Only 12% of manufacturing executives said they are optimistic about the U.S. economy over the next 12 months, according to the PricewaterhouseCoopers Manufacturing Barometer, while 36% said they are uncertain............
More than half cited energy prices, lack of demand, and the weak U.S. dollar as barriers to growth. Falling profitability and regulatory pressures were also among top concerns.
The proportion of those who cite capital constraints as a barrier to growth more than doubled, to 32% from 15% last quarter. The shift in part reflects less free cash flow from operations
That compares with 29% who said they were optimistic in the fourth quarter, and is down from 57% a year ago. Among a control group of executives in other sectors, 18% were optimistic and 39% not sure.
Optimism about the world economy is also waning, according to the survey. About 38% of respondents said they are optimistic, down from 64% a quarter ago and 83% in the first quarter of 2007.
SAN FRANCISCO (MarketWatch) -- Centex Corp. late Wednesday reported it swung to a fiscal fourth-quarter loss of $910.5 million, or $7.36 a share, from a net income of $198.9 million, or $1.65 a share, a year ago. The loss from continuing operations for the fourth quarter was $7.34 a share. Revenue slid to $2.31 billion from $3.64 billion in the year-ago period, said the Dallas-based home builder. Analysts polled by FactSet Research had expected a loss of $2.14 a share on revenue of $2.09 billion. Home closings during the period decreased 33% to 7,100 homes and average sales price slid 15% to $267,953.
Friends asked that I meet with their financial planner this PM when they were there. God, I feel old. Early 30-something MBA/Lawyer with starched shirt and all of the looks.
He thinks that the market is in a great condition to buy and that they should continue to plunk $ into the growth funds. After all, so much of the money was made in the first 6 months after the '87 stock crash. Also told them to keep their eldest kid's college funds in a 70/30 stock/bond fund until he's ready for it next year.
And hey, it's not a recession since it came in today at .6% GDP. With the Fed cut of quarter point, things are really looking up.
Yes, I'm going to give them my real thoughts this evening. What an assclown.
Starched shirt, oh no! Of all the reasons not to like somebody and their chosen profession, dressing like a professional at work has got to be pretty low on the list.
Next fed report should be less wordy and more accurate.
I suggest "we are screwed."
Its concise, accurate and since its bad news, the stock market will go through the roof. GM posted a "smaller loss than expected" and their stock goes up 10%!
Anyone that thinks this is the end of the rate cuts is nuts, the US is headed right down the Japanese rabbit hole with a lot of assistance from FED policies but that's all they know.
O-Joe:A sell-off after the FED announcement tends to be followed by strong uptrends two weeks out (after another day or two of sell-off).
Are you sure? The last sell-off after the FED announcement that I remember was in December. And that portended an extremely steady decline through the first part of Jan, until the emergency rate cut/stick save.
What FED announcement stick save are you looking at?
I don't see the pause language in their statement, and I don't think the market did either. Gold mining stocks were up as were the commodities. I guess you can read whatever you want into it, but I was under the impression that BB would avoid using such arcane language as Greenspan. And if he was signalling a pause, he sure didn't come out and say it. Sure, with rates at 2% you'd think they would pause.
Regardless of the language, we have seen the Bernanke put exercised a few times since last summer. I have no reason to doubt that they will cut rates again if the market starts to tank...especially on an expiration Friday at 2pm Eastern time. He has plenty of bullets left before November. After that, he doesn't care and will probably resign to spend more time in another country.
A sell-off after the FED announcement tends to be followed by strong uptrends two weeks out (after another day or two of sell-off).
O-Joe
Optimistic-Joe | 04.30.08 - 4:33 pm |
You could be right in the short-term. All I know is that the market is now lower after all these rate cuts than when the Fed began this back in September of last year. (It's about the same level as September of 1999 for that matter.) That 1405 level on the S&P is very stiff resistance.
Starched shirt, oh no! Of all the reasons not to like somebody and their chosen profession, dressing like a professional at work has got to be pretty low on the list.
JLR | 04.30.08 - 6:15 pm
I used to do the corporate gig, too.
But what this guy was saying was straight from the sales playbook, so the whole outfit struck me as empty.
My mom's FP also dresses to the nines, but he's older and has lived through the '70s investment world, the '87 crash and the dotcom bust.
Ben is doing everything he can to chase money out of safer investments into the casino. Real rates are now negative by 2% at least, killing seniors living off of interest on savings.
Sleep well Ben. Someone in America will be eating catfood because of you.
"Recent information indicates that economic activity remains weak. Household and business spending has been subdued and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters"
= Translation: the economy, the financial markets are skating on thin ice...and the heat is still on.
"Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully."
= Translation: Sally is getting over the flu but Paul is not recovering as well, and has shown signs of pneumonia. Due to his background of chronic bronchitis his condition will have to be monitored closely, as far as we can see.
barely writes: Ben is doing everything he can to chase money out of safer investments into the casino. Real rates are now negative by 2% at least, killing seniors living off of interest on savings.
Sleep well Ben. Someone in America will be eating catfood because of you.
barely | 04.30.08 - 7:01 pm | #
Great post barely. How is mom in law doing? still going out wit dat UBS broker?
Bernanke is money printing hyperinflator nut.
Please fire this guy now. The guy is clueless. Most of on this board saw this tsunami hitting 2-3 years ago but this dufus did not see a thing but bailouts and handouts.
Noble said: "...I have been preparing for a recession since Jul 2007 in our company..."
Positioning yourself better no matter what comes, right? And if no recession comes, you'll do well?
This is a subtle point that I think so many posters here miss. People that are standing on the railroad tracks and worry that a train is headed their way get off the tracks, they don't just stand there until a train comes along and hits them. As you have wisely done.
Me, too. For example, I got a "piggy-back" interest-only HELOC when I refinanced my house a few years ago. But I didn't just pay the interest, I made regular payments against the principal, too, and now it's nearly paid off. I've cut back on credit-card spending and have been aggressively paying-down that, too.
Responsible, far-sighted actions like we've taken leave us better off no matter what, but especially in an ongoing economic expansion.
Noble then said: "So if you accept that then ok - real GDP grew by 0.6%. If you think inflation is higher (I suggest you read and subscribe to http://www.shadowstats.com) then we had a contraction...."
Actually, I don't accept that. I measure GDP year-over-year. In Q4 2007, real GDP grew by 2.46% over Q4 2006. In this past quarter, Q1 2008, real GDP grew by a matching 2.46% over Q1 2007. If you were to get the real GDP data over the past few decades and calculate it out this way, you'd see that this is a comfortable distance from a recessionary number and the economy didn't simply eke out a fractional gain.
As to Shadow Stats, their numbers are of no use to me, or to anyone, IMO. You can't change one economic indicator in isolation and compare it to another indicator that hasn't also been appropriately adapted. Not if you truly want to be intellectually honest about what you're doing, anyway.
I'm proving that it's possible to make educated economic forecasts using existing, un-altered data. I believe I'll be able to continue to do that.
Sebastian said:"Me, too. For example, I got a "piggy-back" interest-only HELOC when I refinanced my house a few years ago. But I didn't just pay the interest, I made regular payments against the principal, too, and now it's nearly paid off. I've cut back on credit-card spending and have been aggressively paying-down that, too."
Why not pay cc debt first? heloc interest rate should be lower plus the interest is tax deductible
A lot of the complaining about GDP deflator reflects ignorance what the thing is. If you don't know what GDP is, and how it is calculated, don't expect the data to make any sense.
GDP is a measure of domestic production (or income - there's two ways at getting to the number). Imports represent a drag on domestic income: the goods are produced outside, but they consume income here. They enter the GDP equation with a negative sign (i.e., they are subtracted).
So what? Well that means that imports are in "bizarro world" (to quote a popular phrase here). Imports have a negative sign where they appear in equations (relative to other components) - and that means that RISING IMPORT PRICES DEPRESSS THE FREAKING GDP DEFLATOR.
Yes, that's right - the explosion in crude oil import prices is pushing down the deflator, increasing real growth.
That's crazy, but that's what the bloody equations say has to happen, so deal with it.
In the long term, it should wash out - rising energy product prices will push the deflator back up. But in the short term, it means you have to be very careful in interpreting the short-term swings in GDP data.
Amazingly enough, the NBER (the people who date recessions) know some macroeconomics, and know that the GDP number can be misleading. For that reason, a recession is NOT defined by shrinking GDP. (Hint to anyone who believes Sebastien's nonsense: he's wrong. The recession started last year. All that remains is for the NBER to pronounce.)
And for those of you spluttering in rage about this: get a grip. The markets ignore the GDP report, for precisely this sort of problem. (The equity market may not, but that's probably because equity investors tend to be somewhat, um, "reality challenged".)
When is the bond market going to say "enough-is-enough" to contaminating the Fed/US Treasury with dicey paper via TSLF, BSC Bailout, etc? Am I missing something about why this is "OK"?
Also, when is the deficit going to become "unmanageable" in the eyes of the bond market?
When is the bond market going to say "enough-is-enough" to contaminating the Fed/US Treasury with dicey paper via TSLF, BSC Bailout, etc? Am I missing something about why this is "OK"?
Also, when is the deficit going to become "unmanageable" in the eyes of the bond market?
Ever?"
Japan has shown the problem with relating deficits to interest rates - biggest debt outstanding, lowest rates. In a recession, nobody worries about rising deficits. Problems will show up only if central banks get antsy, or during an up-cycle.
With regards to TSLF, we have enough other credit worries with other entities; no time to analyze the Fed's balance sheet. Hey, they're AAA, right?
bond guy, I wish you had posted that at the start of this thread: you might have saved us from some considerable amount of mistaken argument. Do join in more! THX!
Amazing that there are people out there claiming no disaster has happened or will happen because the government figures say so. Whatever, guys! Have a chit-chat with the people losing their homes and jobs, or the people who can barely afford food and gas thanks to our "inflation is contained" Fed and the rest of the crooks.
The disaster is slow moving, but it IS happening, and the people in charge will deny it to the bitter end. We, the realists, have already pointed out how cooked the numbers are ranging from the assorted "creative" ways to measure inflation, unemployment, etc. to the obviously fake inflation deflator used for this past quarter's GDP number. Yet the bulls claim "all is well!" because the official numbers say so. Yeah, because people in power ALWAYS tell the truth - right!
Wednesdays message from the Federal Reserve was not a firm one-and-done as many in the markets thought it would be. The US central bank made clear that it would like to pause in June, but it is not certain that Wednesdays quarter-point rate cut marks the end of the easing cycle.
Nor did the Fed train its guns on inflation and target the link between expected interest rates, the dollar and commodity prices, as a growing number of experts suggested it should.
Instead it only lightly altered its evaluation of the respective risks to growth and inflation from mid-March, leaving an implicit bias towards growth risks even as it dropped its explicit bias.
Indeed, if anything the Fed had more positive changes to make on inflation risk than on growth.
This suggests that while the US central bank is inclined to pause in June, the market needs to rethink the nature and purpose of this plan.
The Fed does not think the risks to growth have fallen sharply and the risks to inflation are mounting. It thinks the risks to growth are largely unchanged and the risks to inflation have not increased.
The assessment of growth risks in the statement is sobering.
The Fed is worried about consumer spending, business spending, stressed financial markets, still tight credit conditions and a deepening housing contraction above all, accelerating house price declines.
However, it does believe that it has already done a lot to fight these risks, through substantial easing of monetary policy 325 basis points of rate cuts since August and liquidity support operations.
The logic of the Feds pre-emptive rate cut strategy is that at some point it should be able to take time out to assess unfolding economic weakness, rather than keep cutting in tandem with weak data.
Monetary policy works with a lag, and many policymakers think the big cuts already made will start to boost growth from the middle of this year onwards, reinforcing the impact of tax rebates.
This will be particularly the case if market healing spreads, reducing the impediments to the transmission of monetary policy.
Yet it is unclear how powerful the lagged effects of past rate cuts will be, given the offset from higher risk spreads and market strains.
Financial conditions are tighter now than last August, on some measures.
The Fed would like to pause to evaluate how the economy performs around midyear, how strong the boost from fiscal and monetary policy is, and how likely it is that the economy will weaken again as the impact of the fiscal stimulus fades the W-shaped downturn scenario.
It also wants to allow time to judge how much support monetary policy is likely to get from fiscal initiatives including targeted intervention in the housing market.
Fed officials would like to see a shift in the so-called policy mix to take the burden of fighting the credit crisis away from monetary policy, but are not sure to what extent this will materialise.
Above all, the Fed wants to see if there is any sign around mid-year that falls in house prices are likely to slow an essential ingredient for any recovery.
So a pause makes sense, even given the Feds economic outlook.
As the reference to ongoing liquidity support in the statement implies, it could continue to expand these efforts while keeping rates on hold.
If financial markets continue to heal, the economy avoids a slide into full-blown recession, the US consumer holds up and house price declines start to slow, this initially dovish pause would evolve into a more hawkish stance, and ultimately rate increases.
However, the Fed is not 100 per cent certain it will have the luxury of pausing.
Even if it does, investors should be alive to the possibility that the next change after that could still be down, not up.
First. Thank you uncle Ben. Thank you very much.
Dramatic pause, followed by more cuts.
Nothing like a little salt on the wound.
To the moon! Alice...to the moon!
pause, then cut at the next meeting...
The SUV-driving, McMansion-owning US lumpenconsumer had his day in the sun, and now its over.
The message is clear- the USA needs to stop using less oil or fight for it. Memos have been quietly exchanged around the world, and devaluing the USD is a highly defensible way to bring about demand destruction in the world larges economy.
Did you get the memo?
I swear this is the last time I'll have a drink ... I swear this is the last one!
Err, sorry...start using less oil is what I meant.
The Fed has been driving with it's "signal" on for quite some time now....no turn yet.
The Fed has been driving with it's "signal" on for quite some time now....no turn yet.
We're all Floridians now!
That's a great relief.Finally, the Fed has resolved the subprime mortgage crisis.
Now I can sleep until Monday before gold retests U.S. $1,000.00 per oz.
I don't see the pause.
Which implies to me that they know something is still much worse than Wall Street wants to believe or accept.
I'm suprised that he didn't cut by 50bp. Paulson must have told him that he was ok with a 25bp this time, gave him a lollipop, patted his head, and sent him on his way.
The dollar goes down and oil goes up. Good analysis above concerning effort to reduce US oil demand. We are pieces on a big chess board and we are about to be sacrificed.
"We're all Floridians now!"
Is that right? Another reason to stay outta FL!
The Fed's stated worrying about inflation is about as believable as Paulson's statement that the US favors a strong dollar. Actions speak louder than words, and their actions show that they don't care about inflation or a strong dollar.
Navigating a supertanker by the stars.
I don't see the pause.
That penultimate paragraph sounds like an ending to a story to me. Also the language about inflation sounds more ardent lately.
I think they should have not cut the .25, but as I said, this is it. Especially now that the checks have gone out.
It seems odd that when the day has good news like we're not in recession, the FED only cuts 25. I'm starting to think all the goverment news releases are orchestrated in advance. If the FED was planning on cutting 50, GDP would have been reported as negative.
I don't think the FED can cut anything larger then 25 going forward for fear of running out of ammo too quickly.
You heard it here first.
Guess what will hit $200 by Christmas?
Navigating a supertanker by the stars.
puntino | 04.30.08 - 2:41 pm |
Actually a guy on the front of the boat with a long stick sounding for the bottom while traveling at full speed.
Oil soon to be $130/bbl. Thanks Ben!
A brief pit stop on the race to the bottom?
lies lies lies
our government lies
inflation numbers
deficit numbers
public debt numbers
gdp
and the disappearing M3
and as for atta boys to Sebastian...
ha, really? .6 percent gdp growth... well weeee-doggie...
bet the numbers were in part inflated by the financial "industry's" creation of exotic financial instruments that have little to do with the REAL economy.
we are watching the planned, deliberate systematic destruction of the dollar.
If oil hits 200 by Christmas, it's going to have to do most of that between election day and christmas.
There is no way a republican is going to get elected president if oil is at $175 on election day.
Actually, I guess the republicans and democrats in congress are now going to have to join hands and start spending more and more to prop up the economy until election day...none of the incumbents want to be voted out on a wave of massive anger.
Don't worry guys. Here comes another qtr end liquidity crisis around June 10th. Boom, another 50bps cut.
We will also see another 25bps cut July end.
Is there anyone here could bet against seeing less than 1% interest rate before Decemeber?
I am all for 0.5% by end of this year.
Let rob the saver and destroy them.
I dont know whom are they(FED) going to rob next year.
Anonymous said: "Which implies to me that they know something is still much worse than Wall Street wants to believe or accept."
Respectfully, I don't think the Fed knows anything that we don't or can't reasonably deduce.
Sebastia
That penultimate paragraph sounds like an ending to a story to me. Also the language about inflation sounds more ardent lately.
"The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability."
What part of that sounds like an ending to you?
CR: Where do you get the notion of "pause" ?
This must be the only remote remote hint: "some indicators of inflation expectations have risen in recent months"
"Respectfully, I don't think the Fed knows anything that we don't or can't reasonably deduce."
They know by far more than us. They know who comes to beg for what and when.
I agree no pause. If the equity market is ay ok - meaning flat to up -then maybe, otherwise they will continue to cut.
Yal,
They have signaled that they will now pause for eight weeks, until the next meeting, before cutting again.
Seriously, how many chances does the Fed get to PLEASE the market by not cutting. This was it, and they took a pass. That means the commodities rally can continue without Fed interference.
I don't like the statement is seems to day "it could be black it could be white its whatever you think". The Fed needed to take a stand and show confidence that it believes the market has improved. It declined to state.
I too don't expect a pause.
This summer is gonna probably see another out-of-meeting cut.
Mish had a good article several days ago questioning why the gvmt would be filling the strategic petroleum reserve with oil at +$100.00. Maybe they plan to invade Iran before Bush leaves office to lower the price.
Wait, I thought Iraq was supposed to provide oil for rebuilding their country and fueling ours with $0.29/gallon gas. Where is that damn red pill.....
They signaled no more cuts? What, until the next meeting?
Guys, they haven't annouced the TAF for May yet.
I dont think they are seeing the big pop from the cut they are expecting.
So, tomorrow we are going to see TAF auction of 75B each next month. Shorts beware
Is GC08M the ticker symbol for the Shanghai Stock Exchange?
I think this will spark a bond rally again. The Fed needed to take a stand NO CUTS. It did not do this.
So a change in rate cut velocity from 50bps/month to 25bps/month is a pause?
I think they should have not cut the .25, but as I said, this is it. Especially now that the checks have gone out.
I agree, but you gotta work with what you're given.
I can now afford to pay the interest on that much more margin debt so I'm piling it on trying to decide what to bubble up next.
Thanks Ben!
AC:
International Markets Home - Markets Data Center - WSJ.com
Go nuts.
TNX now nose dive. Flight to safty again ? after TEDSPREAD has been moderating for a week - it spiking up since 2:15... Now at 1.48 after visiting 1.38 today
May Day tomorrow? Is this market going down? Ben took the punch bowl away but said its not safe to go home. Worse and weakest FED statement in the past year.
There is no way a republican is going to get elected president if oil is at $175 on election day.
Most americans don't give a rats tush about the price of the raw product. The do see (and feel) the impact of the pump price. Keep one eye on the strategic reserve once hurricane season is in full swing (conveniently just before the elections).
Quote from the blog of a soldier who just returned from Iraq a few days ago (and has been away from the pump for an extended period)... Gas is crazy expensive
What part of that sounds like an ending to you?
Did you actually parse that? When the Fed references past actions in a statement like that, it tends to mean a turning point.
Sorry to disappoint all the nihilists, glod bugs, and fiat fans, but the rate cuts are done unless something catastrophic happens. Now since I've said that, you can proceed...
money has been manufactured out of thin air by IBs and others who in the creation of exotic, on and off book securities and investment schemes have bilked the system.
along with the limited and necessary bailouts must come prosecutions, fines and taxes to recover the ill-gotten gains or our system is f^(K#D
as woody Guthrie said
Some men will rob you with a six-gun,
And some with a fountain pen.
LEH tanking again....
Oh and, btw, i just checked the futures and oil is down, as is glod after the announcement. Go figure.
Gold was down to the mid $860s, but rose $12 after the announcement. Just saying.
I don't think we have seen crazy just yet.
Uncle Ben's Helicopter rice now takes longer to cook
That's spot gold, that was.
I found the red pill. Aaaaahh
Gates Says 2nd Carrier in Gulf is 'Reminder' to Iran - Politics | Republican Party | Democratic Party | Political Spectrum - FOXNews.com
Looks like $300.00/bbl; oil by Christmas
Uncle Ben's Helicopter rice now takes longer to cook
Funniest thing I've seen all week. Good one!
GillianX writes:
Paulson must have told him that he was ok with a 25bp this time, gave him a lollipop, patted his head, and sent him on his way.
GillianX,
Kind of like Benny Hill used to pat little Jackie Wright's head???
Sebastian wrote:
Respectfully, I don't think the Fed knows anything that we don't or can't reasonably deduce.
Sebastian | 04.30.08 - 2:51 pm | #
oh yeah...
they know, (and you don't) what was in the toxic brew of Bear Sterns investments that they vouched for to the tune of 29 billion dollars potentially, of the taxpayers money.
they also know what crap is being accepted at the PDCF and TSLF windows...and you don't, and neither do i.
C is bid 25.28 1 cent above the offer price.
Will it break????
Well, they were up for a few hours at least
Did you actually parse that? When the Fed references past actions in a statement like that, it tends to mean a turning point.
"... will continue ..."
"... will act ..."
Those are not words that indicate an ending. Those are words that indicate a story that has not yet reached its climax.
Namecall all you want ipodius, but you predicted no rate cut and were proven wrong. Forgive me if I take your predictions about future rate cuts with a grain of salt.
Just doubled my gold holdings.
Wait until Europe and Asia get to play tomorrow.
mock turtle said: "they also know what crap is being accepted at the PDCF and TSLF windows...and you don't, and neither do i."
Actually, you're right. I should have said "I don't think the Fed knows anything useful that we don't or can't reasonably deduce."
Sebastia
LEH - what is the rumor that drives it down ?
WEAK STATEMENT. This Fed won't say its pro growth/pro inflation fighting; don't take a stand everyone gets burned.
Covering a little something here. Lunch money.
My bid for some short gold got hit just a minute ago. Stop tighter than a fist on this, too many crazy people trade that crap.
Leh - No rumor just 20 to 1 leverage while economic fundamentals deteriorate.
"Guess what will hit $200 by Christmas?"
At $200/gallon it'll be tough to fill up the gas tank. It's going to be lumps of charcoal for the missus and the kiddies at Xmas.
2 of the three indexes are RED and Dow only up .4%.........
bluestatedon - You won't be able to afford charcoal at Christmas if gas is 200 per gallon!
Guess what will hit $200 by Christmas?
A gallon of milk?
Nest commodity run. People will burn wood because coal and nat gas prices have skyrocketed.
TIO looks to add another $3.2 B to the slosh, that will take it over $70 B - total slosh is $282 B today, on the pace it has been over the last week that is +$300 B slosh tomorrow...anyone know what the all time highs are for TIO and total slosh?
(doesn't count the 4 letter money pumps - TSLF or PDCF)
We might have our answer for the next bubble:
Brazil's Bovespa index climbs 3.9% after S&P credit upgrade
The Fed's "Pause" signal:
If you compare the current FOMC statement to the March 18th statement (previous meeting), it appears the Fed is signaling a pause.
On March 18th, from the FOMC statement
(emphasis added):
"Todays policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will act in a timely manner as needed to promote sustainable economic growth and price stability."
The same paragraph of the statement today:
"The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability."
It appears the Fed believes the downside risks to growth have diminished and the inflation concerns remain about the same.
Best to all.
GRRRRRRRR! Now I'm REALLLLLLY ANGRY!
let's see
three FOMC meetings down
5 meetings to go
25 basis point drop each
yep new administration takes office hemmed in.
""I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.", Grover Norquist
(these are the kinds of guys helped gut regulation and create this crisis.)
Goldilocks RIP.
"You won't be able to afford charcoal at Christmas if gas is 200 per gallon!"
Oh, I'll be making my own charcoal out of the furniture and wood flooring. Gotta keep warm!
wow, markets turned negative. is it fair to say that fed rate cuts are now completely irrelevant?
wow, markets turned negative. is it fair to say that fed rate cuts are now completely irrelevant?
Irrevalent since 2005 when the banks took over monetary policy. FED may cut banks will raise their rates
Covered 2/3rds of the day's positions now.
All-in short gold, hedged high and low. Butt-ugly chart.
The markets will turn negative when enough short small investors have been burned. It's a zero sum game for the street if people stop playing.
What are the chances this increases wages at the median above inflation?
Slim & none. ZERO.
It's a good thing I can spend all those hedonic quality improvements like computer ram to fill up my gas tank.
sebstian...just when i think you can't possibly say anything more inane than anything you have said before you go right ahead and out do yourself.
Sebastian wrote:
"Actually, you're right. I should have said "I don't think the Fed knows anything useful that we don't or can't reasonably deduce."
Sebastian | 04.30.08 - 3:09 pm | #
It will be Santarchy for all and for all a good night.
Santarchy & Santacon
A friend does this in Japan and added Cambodia & Thailand in 2007.
Guess what will hit $200 by Christmas?
There is 42 gallon in each barrel. so it comes to $4.70 for each gallon of crude oil. Retail will be above $6 then
cross post from Zacks.com
As expected the Fed cut the Fed Funds rate again today. Below is the current statement and the March 18th statement by paragraph, with my commentary interspersed.
The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 2 percent.
The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 2-1/4 percent.
We started this round of interest rate cuts back in mid September at 5.25%. Thus in a little more than six months short term rates have more than been cut in half. It seems likely that this is the last cut for a while. Monetary policy works with long lag times, and at best we should only be starting to feel the effects of the first interest rate cuts now.
Recent information indicates that economic activity remains weak. Household and business spending has been subdued and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters.
Recent information indicates that the outlook for economic activity has weakened further. Growth in consumer spending has slowed and labor markets have softened. Financial markets remain under considerable stress, and the tightening of credit conditions and the deepening of the housing contraction are likely to weigh on economic growth over the next few quarters.
Not too much difference here, except a change in the tense from has weakened further to remains weak. This implies that rather than heading down the economy is bumping along the bottom. However last time around they just mentioned weak consumer spending, but this time they added that business spending has been weak as well. The first sentence is marginally more hawkish than the equivalent statement six weeks ago, the second statement is marginally more dovish. Net-net it looks like a wash. Note that there was no change in the statement about the stress on the Financial markets. Given that the last meeting was right at the time of Bear Sterns almost going under, perhaps the most systemically stressful time in the last half century, the lack of change in this part of the statement is interesting.
Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully.
Inflation has been elevated, and some indicators of inflation expectations have risen. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook has increased. It will be necessary to continue to monitor inflation developments carefully.
They are crossing their fingers and praying that inflation does not get out of hand. The Fed has been looking for energy and commodity prices to stabilize or retreat for a while now, and it has yet to materialize (well the last two days have seen energy prices retreat a bit). The idea behind looking at core measures of inflation is that food and energy prices are more volatile than overall inflation, but that over time they are similar. That has not been the case at all over the last five years. Perhaps its time to junk the whole idea of core inflation.
The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time and to mitigate risks to economic activity. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability.
Todays policy action, combined with those taken earlier, including measures to foster market liquidity, should help to promote moderate growth over time and to mitigate the risks to economic activity. However, downside risks to growth remain. The Committee will act in a timely manner as needed to promote sustainable economic growth and price stability.
They took out the reference to downside risks to growth remaining. This makes the statement far more hawkish. Clearly they do not want to have to cut again. This is most likely the last cut for a long time. The argument will soon move to if the Fed should be raising interest rates to tame inflation and help support the dollar. Of course there are still downside risks to growth, but the upside risks to inflation are becoming more worrisome (uncertainty about the inflation outlook remains high).
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Gary H. Stern; and Kevin M. Warsh. Voting against were Richard W. Fisher and Charles I. Plosser, who preferred no change in the target for the federal funds rate at this meeting.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; Sandra Pianalto; Gary H. Stern; and Kevin M. Warsh. Voting against were Richard W. Fisher and Charles I. Plosser, who preferred less aggressive action at this meeting.
Most of the time there are no dissents in the Fed policy statements, having 2 members object is very unusual. Fisher and Plosser both disagreed again, for the second meeting in a row. They are clearly more worried about the inflation situation than the rest of the Fed.
In a related action, the Board of Governors unanimously approved a 25-basis-point decrease in the discount rate to 2-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Cleveland, Atlanta, and San Francisco.
In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 2-1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, and San Francisco.
As usual, they brought the discount rate down along with the Fed funds rate.
The Fed is like a doctor faced with a patient with two problems, he has cancer (inflation) but is having a heart attack (Financial markets seizing up). Even though the heart medicine is known to speed the spreading of tumors, you have to give it to the patient or he will die in the emergency room. It looks like the heart condition has stabilized, although the patient is still very weak and short of breath. This is the last dose of the heart medicine. Soon the patient is going to have to start chemo, or the cancer will get out of hand. Right now the Fed is hoping for divine intervention (moderating prices for energy and other commodities) to make the tumors go away. Its not likely to happen, and the Fed knows it. However, if they start the chemo to early, it will cause another heart attack. Look for no change in the Fed Funds rate for the next few meetings and then for the Fed to start cautiously raising the Fed Funds rate in 25 basis point increments.
wow, markets turned negative. is it fair to say that fed rate cuts are now completely irrelevant?
I think it's more fair to say that a lot of short $ was sitting on the sidelines waiting for the post Fed announcement bump.
Tim
your comments re banks taking over monetary policy
in my opinion,you are on target
Is it any wonder Americans can't save a plug nickel. You CAN'T spend hedonic improvements. Hedonics actually remove spendable cash from consumers. Cash accounting is more suited for consumers than accrual accounting. Consumers can't put their hedonically imputed gains in a level 3 account and borrow against them.
The savings rate plummeted in conjunction with the implementation of the BOSKIN nonsense.
AHHHHHHH!
Still lots of room for lower rates with The Positive Inflation Model!
The market has recovered from a brief dip following inline data this morning. Trade is deferring to FOMC and they will likely to defer to data. So the circuitous loop will continue but not until the Fed has delivered another 25 basis points of easier money and a likely bias to pause at the Jun meeting.
Look for 1.5% by year end!
I don't know how willing they are to lend to each other, but the banks sure are willing to tap out the consumer. Just got a call from C (well, to be precise, an outsourced representative working the night shift in India) urging me to let them send me a check for the amount of available credit on the card I have with them. The pitch was that the interest rate on the advance would be 0% for six months, plus some not-quite-understandable-because-spoken -way-too-quickly disclaimer of fees.
I assume this is a way of maximizing fee income--between use of the card between now and the clearing of the check, plus the fees, most people who accept the offer would be over their credit limit as soon as the check hit the account. This was a common ploy a few years ago for the fly-by-night secured-card operators; now Citi is reduced to this?
Whatever...it's obvious they don't mind having as many customers as possible drawing their lines to the maximum. I can see why the bankruptcy bill was such a priority for these guys....
Angry commenter at the Prudent Bear forum says, "The FED is a terrorist organization." LOL.
mock turtle said: "sebastian...just when i think you can't possibly say anything more inane than anything you have said before you go right ahead and out do yourself..."
Well, think about it. I've been saying "no recession" for over a year, even before any of us knew anything about the problems Bear Stearns was having, for example.
Yet with all the emergency Fed "bail out" activity...no recession.
I keep trying to point out that when making economic forecasts one has to look at the whole picture, but...
Oh, well.
Sebastia
i wonder if FFDIC would mind if i change my handle to:
FFMOC
We are still at just the leading edge of the J6P economic middle finger.
Anyone looking for a bottom is dead wrong at this point, because from what I've witnessed in the last two weeks, the consumer is totally dead.
Sebastian - you may be right on the government's faux definition of a recession.
But my definition includes PPP (Purchasing Power Parity) and Quality of Life.
That has been nothing but negative for the last year.
but the rate cuts are done unless something catastrophic happens [Ipodius]
Ohhhh, I can't resist. Edit to read "unless something catastrophic [is created]" and the election will be, ahem, postponed. (Although, I have to admit, Bush seems ready to be done with the "hard, hard work" like, yesterday.)
I cannot believe inflation is contained at all. Whatever the figures say, people feel it every day at the gas pump and at the supermarket and lots of other places too. Pretty soon, if the government begins to tell people inflation is "contained" they are going to think the government lies. Of course it does, all the time, about a lot of things. Up to now, people didn't think it lied about the economy. But...
We can handle a recession. It's all the bailouts and inflation that are killing the family budget.
All to maintain the fictional asset values of the wealthiest Americans.
Where is the wisdom in THAT?
sorry in the origional I had bold and italics to seperate out the current and last statements, when pasted over here it is a little hard to follow.
Dollar falling, emerging markets rallying.
Looks like hedgies are trying to orchestrate a hot money redirect out of the US.
If they're successful the dollar carry trade will pick up steam and the global economy will continue disintegrating in this vast ocean of easy money the Japan and the US have created.
The rally fades...
Sebastian
regarding gdp at .6 yep,you were right but by the slimmest of margins...
but in terms of the trend and the overall sickness of our economy you are sadly mistaken.
Hey Sebastian wanna make a (bet) no, i mean gentleman's agreement?
50 dollars to the tip jar from the looser...i say gdp negative Q2, and you say positive...ok?
Totally disagree. There's too much emphasis still on the economy weakening further as the opening sentence. If there was to be a strong liklihood for a pause, they would not have lead off with such a strong statement of a weakening economy.
It's clear the Fed is willing to sacrifice the dollar, for now.
Interesting Times said: "Sebastian - you may be right on the government's faux definition of a recession.
But my definition includes PPP (Purchasing Power Parity) and Quality of Life.
That has been nothing but negative for the last year."
I don't think I'm going to "win" the recession argument based on semantics. Once it's all said and done, I think there will clearly be no recession.
My experiences over the past year with "purchasing power parity and quality of life" do not match yours and things are actually looking better for me, even though I'm just a middle-class boomer like so many tens of millions of others.
Sebastia
mock turtle - lets wait for the revisions to the 1st qtr. The .15 "growth" will be adjusted.
Just got a call from C (well, to be precise, an outsourced representative working the night shift in India) urging me to let them send me a check for the amount of available credit on the card I have with them. [Yalt]
I don't know, sounds scammish to me. Did they ask for your credit card number?!
CapitalOne is reducing credit limits on folks with excellent credit ratings, heard on the teevee this morning.
stuart
Either way it does not matter. If you hold than eauity markets will ask for more cuts. If you lower than the dollar will weaken and eventually hurt equities anyways with higher inflation.
Recall Sebastian said that Charolette RE was doing great. The Case/Shiller #'s yesterday proved otherwise...patience.
My experiences over the past year with "purchasing power parity and quality of life" do not match yours and things are actually looking better for me, even though I'm just a middle-class boomer like so many tens of millions of others.
Sebastian
Sebastian | 04.30.08 - 3:41 pm | #
Does your car/bus/taxi run on ponies?
This is what it looks like when hot money heads for other countries:
EWZ
There's probably a short squeeze element there too.
Idiot Ben strikes again.
I don't know, sounds scammish to me. Did they ask for your credit card number?!
No. Agree--that's always my first thought on these calls. Maybe I just didn't let them get that far into the script, but you'd think they'd try to get there before the mark decided he had better things to do (a point I reached in about a tenth of a second).
crispy&cole
i agree and posted above about government lies...M3 etc how i didn't think this number would stand.
now lets see if Sebastian wants to have a little fun and remunerate our graces hosts at this blog in the process...
how bout it Sebastian...you game?
i'm sure Tanta or CR wouldn't mind posting whether the looser made good.
by the way, we all owe CR and Tanta for this forum and all the news they share.
Interesting Times (snidely) asked: "Does your car/bus/taxi run on ponies?"
I'm paying $3.60/gallon gasoline just like everyone else.
S.
CapitalOne is reducing credit limits on folks with excellent credit ratings, heard on the teevee this morning.
What are they doing to folks with poor credit ratings?
"graces" stood in for gracious
in previous
I'm paying $3.60/gallon gasoline just like everyone else.
Ponies!
I'm paying over $4.
2%? Bush's Approval Rating?
I'm paying $3.60/gallon gasoline just like everyone else.
S.
Sebastian | 04.30.08 - 3:45 pm | #
You know something? I'm glad you're posting here.
Thanks.
I'm paying 4 bucks for gas. 3.50 would be a blessing right now. That EWZ ETF is a play on commodities, not really a bet on Brazil. It doesn't hut that Brazil has budget surpluses though.
The world will remember the way US created its currency and half a century later crashed it.
It's a real pity. Since it will cost much more to the country (and the world) than what a reasonable policy à la Volcker would have reached.
But it is obviously too late for anything like this.
I'd recommend that those of you who are aware get ready for the shock!
Good luck to the courageous members of on the contrarian blogosphere.
Sebastian
I'm waiting for you to accept or decline my challenge
common hommie it's only lunch money
Until recently, Canada was running budget surpluses.
I don't see a particular message being communicated in the wording. I see wishful thinking in both the comments on the slowdown and on inflation. I think they cannot signal what they do not know.
CR, you're great with charts and forecasts, but reading FOMC cryptic messages, maybe not so much
"Importantly, policy makers didn't indicate in their statement, as many on Wall Street had expected, plans to halt this current cycle of rate cuts. Only two policy makers dissented, calling for no change in interest rates.
[The market expected something hawkish toward further rate cuts -- the Fed didn't do that. They just kind of moderated what they were saying about the economy," Schrader said. "This rate cut leaves questions as to whether there may be some further economic pain going forward.]
Stocks Close Lower as Rate Cut Kills Rally - CNBC
Only SOME indicators of inflation expectations are causing concern. Only some? Er.... I'd love to see which of your inflation expectation indicators are NOT causing concern? bwahahahahahahahahaha.....
Repeat after me... Iraq has WMDs, Inflation is contained, No recession...
That EWZ ETF is a play on commodities, not really a bet on Brazil. It doesn't hut that Brazil has budget surpluses though.
That doesn't really make sense to me (for today's action). Why aren't commodities going ballistic too then?
Again, an industry that artificially drives up asset prices to make a living has to artificially drive up asset prices to make a living.
Nothing unexpected going on here.
ac,
If you have a moment, could you outline how a DOLLAR-based carry trade would work versus the Yen carry trade or provide a link?
Thanks.
Let's talk about inflation indicators. Import prices rose at the fastest pace EVER recently - over 12%. PPI is running at almost 7% yoy. CPI rose at over 4% in 2007 and was accelerating at year end.
The fed doesn't care about inflation. The fed only wants you to believe they care about inflation.
François
I agree, a Vocker policy at this point would plunge the economy into disaster. The Fed had to take a stand in Sept 07 when instead of playing up to the market. Now everyone expects a bailout (banks, homeowners,homebuilders, airlines, car makers). The inflation bill that would result would get is one that the US treasury and the World cannot afford. Dark days ahead.
ac,
Re: Brazil.
I think their credit rating was upped. That should help lower debt costs & strengthen the currency.
FED would look at inflation expectations Vs unemployment.
they say that "resource utilization" will be down - which mean they expect unemployment to rise and wage inflation not to spike.
all in all this is the most confusing FOMC minutes I have read. I thin they don't have any idea - except the few lurking problem they know all too well.
Borrow dollar at let us say 2% and invest in Euro fixed rate at let us say 4%.
You get 2% interest difference here which your profit. In addition to it if dollar looses value against Euro, then you get exchange rate gain since the borrowed money is immd converted to Euro which is appreciating as time progress.
AC
That doesn't really make sense to me (for today's action). Why aren't commodities going ballistic too then?
The FED's action today showed that they are a dog with no teeth. People are showing a vote of no confidence in the leadership attached to the dollar. There is too much uncertainty as to where the dollar will go.
Why save? Buy land, buy anything that when you drop it on your foot you say ouch. Don't buy any wallstreet BS, paper or pomposity. There can be no value preservation or rainy day funds. Flush everything back into they system and get it back to work, or die! This running fullspeed on an accelerated conveyor, sucks!
Better yet, increase your survivability skills, ability to tolerate pain-deprivation-suffering and enlarge your adaptability because the situation on the ground is gonna be dicey.
Namecall all you want ipodius, but you predicted no rate cut and were proven wrong. Forgive me if I take your predictions about future rate cuts with a grain of salt.
What I said was that the Fed will pause, and if they don't they will only cut .25. I also said (in a gentleman's bet with another poster) that the lowest the rate would go is 2.0%, back when everyone here was screaming they'd cut to zero. I also said glod's rise was over (back when it was over 1000) and i see now that it is under 870. I also said shallow but long on recession. Is there something else you'd like to bring up about what I've said? I've also said that the Dow would see 11,200 for a low. I'm still waiting for that, and perhaps I'm bearish on that. But we still have the summer to go.
Anyone know what the Yen to euro chart looks like?
ac,
If you have a moment, could you outline how a DOLLAR-based carry trade would work versus the Yen carry trade or provide a link?
Thanks.
I assume it would be pretty simple - borrow in dollars at 2% convert to foreign currency by selling the dollars and buying the foreign currency (e.g. the Brazilian real where interest rates are something like 11.75%). This drives the dollar down and the foreign currency up. Then you can buy foreign assets (e.g. Brazilian stocks or bonds) and make money on the appreciating currency and the assets you purchased.
As I understand it this is the basics of how most cross-border carry trades work.
The reason it's fundamentally irrational is that the higher interest rates in the foreign countries are generally intended to offset currency depreciation. The carry trade however causes the target currency to be artificially elevated (as described above) thus giving you the higher interest rate in real terms, not just nominal terms...
That is until the end where the currency violently collapses (e.g. Iceland).
Sebastian,
You may be content with a declining standard of living, but many of the rest of us are not.
Covered and clear. I love Fed days.
I think their credit rating was upped. That should help lower debt costs & strengthen the currency.
I saw that, but the article I read also mentioned that this action was widely expected.
Sebastian
i'm very disappointed that you did not either accept or refuse my little wager (at 3:39 above).
i would respect if you said no... but in your silence i sense disrespect
disrespect for yourself that is...
Targets for the DOW, S&P anyone?
AC
That doesn't really make sense to me (for today's action). Why aren't commodities going ballistic too then?
The FED's action today showed that they are a dog with no teeth. People are showing a vote of no confidence in the leadership attached to the dollar. There is too much uncertainty as to where the dollar will go.
Couldn't agree more.
IMO words from the Fed (or anyone else for that matter) are meaningless.
I'll believe they're going to stop cutting rates when they stop cutting rates.
Not a second sooner.
And the market is sad, sad, sad again....
Signals a pause??? Gee when you've only got 2% to go that really doesn't take that much courage to do.
Fed to savers: Drop dead.
Short term profit taking in the commodity as well temporary speculation winding down in case the economy is really slowing drastically.
You dont want to get caught commodity bubble when the economy is shrinking at faster rate.
Does anyone have any data on how much is borrowed to fill the gas tank? Because, the people who borrow to fill the tank may not borrow that much when the gas price goes down. This will translate into GDP contraction.
Oh and also I said Trichet will have no choice but to lower the ECB rate before the end of the year, perhaps as early as Q3, as growth pressures trumped inflation concern.
And I'll add that I was in agreement with mp and conjure that financials had seen the worst, although at the time I was not buying and conjure was very selectively. That has changed, as I am now selectively.
mock turtle said: "I'm waiting for you to accept or decline my challenge"
Pardon my language, but your challenge is bullshit.
The problem is that the bearish losers never simply admit that they're wrong.
I've been screaming "no recession" here every quarter since Q1 2007, every quarter there's not a recession, and the bears are always making excuses. It's always going to be the next quarter, or inflation is understated, the government is lying or whatever.
One poster just today called me the dumbest son of a bitch on the planet, for being right!
Sebastia
Weird action on S&P 500 futures last night: at 9 p.m. Pacific, there were contracts on 1.4 million mini contracts, at +3.5. I had never seen that before. 1.4 million is about the volume that we see during the course of 24 hours.
Today, the volume in S&P 500 futures purchases is about 3X what it has been these last few weeks.
Someone feared a big, ugly reaction this morning, and someone is trying very hard to keep the market up, now.
ac, Isn't some of that interest to cover the market risk of the host country as well?
You can't do carry trade with all currencies. Most of the emerging economies has parital conversion system with strings attached to it.
Generally you do currency carry of one developed countries currency with another developed countries currency since all developed countries allow 100% currency conversion.
The Fed would like to hold rates here for a while and see how the stimulus package and the lagged effect of all the rate cuts plays out. The statement is fairly wishy washy because the Fed has spent the past two months getting a more thorough understanding of the holdings of the investment and large commercial banks, and I would have to imagine what they found doesn't make for a sound night's sleep.
Market down several days in a row...I heard from our perma-bull that the "market" is a leading indicator...
Sebastian,
Being saved from a recession by record grain prices and unwanted inventory really isn't a banner year for the bulls.
Call me crazy.
Sebastian writes:
Pardon my language, but your challenge is bullshit.
The problem is that the bearish losers never simply admit that they're wrong.
mock answers
how sad you need to use such harsh language with me
and by the way 50 dollars to the tip jar isn't bs...it's just 50
a high roller such as yourself must certainly be able to afford a little gratitude to CR and Tanta
finally, i'd be willing to bet a trip to the tip jar with you that the .6 gdp number will be revised down...wanna take a ride?
One poster just today called me the dumbest son of a bitch on the planet, for being right!
What do you expect Sebastian? When the facts don't fit the reality, we have to change them...and then these are the same people that accuse the government of doing the same thing. It's pretty funny if you think about it. So far, you have been far more on the money than any posting on this thread, and I gave you kudos for it in an earlier thread. I was pretty sure that number would have been slightly negative or even less positive but you were closer.
I think the trick is to bring no political theory to looking at the data. Here, there is a pre-notion that some sort of disaster has to happen because we are on the wrong track, yet as time passes no disaster happens. Perhaps the people on the wrong track are the ones that keep calling the disaster quarter after quarter and should adapt their methodology.
"The statement is fairly wishy washy. "
Couldn't agree more. The FED has to sound hawkish, but not hawkish enough to scare to market, but nor can they say they risk credibility and say things will get batter. The Fed wants it all
Yeah, he had some great calls on NC real estate, New Century, etc...
Yeah, Seb, no recession, no contraction in the economy.
Profits of publicly held companies did not contract 57% YOY in Q4 2007:
Markets Data Center Table - WSJ.com
Profits of publicly held companies are not contracting 20% YOY in Q1 2008:
The Wall Street Journal Online - WSJ.com Log In
The government gets to come up with silly numbers like PCE deflator, imputed rent = housing services, etc. Companies have to report hard numbers (mostly). I know which numbers that I place greater credence in.
Just got a call from C (well, to be precise, an outsourced representative working the night shift in India) urging me to let them send me a check for the amount of available credit on the card I have with them. The pitch was that the interest rate on the advance would be 0% for six months, plus some not-quite-understandable-because-spoken -way-too-quickly disclaimer of fees.
I get those several times a month (the printed checks). Tear them up into little pieces as fast as they arrive. Someone at C really wants people to borrow.
Companies in emerging countries use currency borrow trade (however you may call it).
For example, The interest rate in India is around 9% per anum. Instead of borrowing within India, the company will borrow Yen from Japan at 1% then convert the Yen to Dollar before bringing dollar back to India for their expansion.
Roughly around 20B-40B worth of money has been borrowed by indian companies in the past few years for their expansion.
So keep an eye on indian stock market when Yen strengthens to 85/S.
Ipodius, Seastion,
Most here aren't predicting disaster. But there is a lot of outrage over senseless bubbles and bailouts. Personally, I think the prudent are indeed being fleeced to bailout banks and speculators.
I'm also deeply worried that an inflationary fed is trashing the lower four income quintiles.
The FED giveth and taketh away and does not knoweth what they are doing anymore. Good try though.
ipodius
it is regrettable that someone (not me) called you a d sob)
not deserved
i enjoy and learn from your posts and Sebastian's from time to time.
i don't need to revise my model..i've done quite well for myself, in a modest but substantial way.
i just think any notion that any bull might do an end-zone dance with a .6 gdp number is not smart...
and by the way, so far i have not seen Sebastian gloat, so no hard feelings.
i just think he is polyana-ish in his prognostications...
a hard rains a gonna fall
On a per capita basis, the US has been in recession for two consecutive quarters now - gdp growth less than population growth. It may not be an "official" recession, but the economic circumstances of the median individual in the US economy have been declining since late last year, which is probably why 80% of the population correctly believes we are in a recession (as per consumer sentiment surveys), even if artificially low gdp inflator numbers prevent it from becoming "official."
jg
Another misleading point in the GDP report is that it measures Jan-March in aggregate and does not show that the economy weakened as the months wore on. If a measure was take from Feb-April Im sure we see a negative GDp
Just wait 9 months. I am confident that the new administration will have no difficulty identifying the start (and end) of any recession well within the confines of the Bush Administration.
2.666 emergency meetings left.
I like Sebastian's comments. He is rational and at times spot on. Even though I don't necessarily agree with his commentary, he seems to have a pretty good grasp of what Wall Street is "thinking".
I was bullish until about 18 months ago and have been in the "bears" camp ever since the fall of 2006 (especially in regards to housing).
Even though it "feels" like a recession, it doesn't mean we are officially "in the middle" of one. That is all Wall Street seems to care about.........
I am confident that the new administration will have no difficulty identifying the start (and end) of any recession well within the confines of the Bush Administration.
Agree. It probably will also be concurrent with the filling of the Strategic Petroleum Oil Reserve and worsening conditions in Iraq.
OT,
CR,
Did anyone in the panel that discussed about Indian economy talked about the following things?
Thx
Hey mock, remember my friends think i'm an uber-bear
i think seb is more towards the bull camp than i am, but still he's right about no recession...yet. and he was close on the call so i think he deserves a shout-out on that.
i try not to politicize my financial musings too much, and call the data trends as i see them. i'm sure i'll win no friends on my DOW low, and i'm in the recession camp but with shallow and long. the interesting thing is that since globalization is bigger and the dollar is in the crapper, we're seeing earnings reflect that. that is both good and bad. and, btw, the dollar i think has seen its low but will bump along for a while longer.
angry, i hear you on the lower quintiles. i'm not sure that has anything to do with the fed in particular, and as i've said i'm very saddened at the FC patterns around here since they are in the lower-income areas. as to the solution, i'm not clear.
Non-government portion of GROSS GDP is up 3.8% from Q1 07 to Q1 08.
The inflation rate is much higher than 3.8%, therefore the economy ex-gov contracted over that last year.
The government can increase spending and fix the deflators all they want. It doesn't prove that Seb is right, only that he is an idiot.
"I try not to politicize my financial musings too much and call the data trends as i see them".
Who cares about politics. What can policy makers do at this point. I think most people here lean libertarian anyways.
"It will be necessary to continue to monitor inflation developments carefully."
Whew, thank goodness. It's all good, inflation is being monitored.
2% Funds, 4% inflation, 6% risk free lending equals free money for the IBs and Wall Street.
Ipodius
i pretty much agree with your call on the dollar in terms of exchange rates with pound, euro, yen and several other major currencies...
yeah bouncing along near a bottom
where i would differ, is not in exchange rates (except bric economies there i think we continue to get hurt)
i differ interms of the bsket of goods that the dollar will buy..we are in for more pain until us productivity ramps up in areas we've off-shored...
and that will be along time coming
Ipodius,
I think inflation is killing the middle class. The fed can end inflation at any time.
Also, if globaliztion prevents incomes from rising then we should lower inflation or even allow deflation of CPI goods. This method worked for over 100 year in America.
That's it indeed. The easing cycle is done and the FED will start raising rates towards fall or winter. The crisis (if you want to call it one) is over. We should all enjoy our life and seek to improve ourselves rather than pointing at the FED's or other leaders faults.
Although I'm currently short the market (!), I will probably go long late this week or on Monday. This is a very bullish market reaction. A sell-off after the FED announcement tends to be followed by strong uptrends two weeks out (after another day or two of sell-off).
O-Joe
Any chance the Fed Governors knew the jobs figures to be released this Friday when they were deliberating over the statement?
Rob Dawg,
It's worse than that. Banks can swap junk for treasuries. The dollar sinks, inflation rises.
ac, Isn't some of that interest to cover the market risk of the host country as well?
Yeah, I think it's a combination of depreciation and risk from instability. The point is the interest rate is higher for a reason. Hot money flows send torrents of money into these economies without pricing in the risk. In fact they tend to do the opposite -- they price out the risk and then go one step further and invert it.
In Ben Bernanke's Hot Money Universe higher risk is a positive; lower risk is a negative.
Also, as I understand it, hot money flows out of the United States will tend to create tighter credit conditions within the United States.
Exactly the opposite of what we need!
We have a weird hybridized mutancy of an economy. Actions by central banks in station 5 panic mode. Pulling all the stops on information manipulation, currency devaluation, debt & distress hiding. While the underlying market has gains indicative of a healthy, substantial productive economy (NOT). The only optimistic news has been the Fed manipulations and innovations and earnings where increase was attributed to greater marketability abroad due to currency plunge. Those are not longterm signals of robustness. Rather like the glee a terminal patient has when it hurts just a little less than yesterday and a rose in the cheeks today. Long term this economy has far more diseased cells than healthy. Cancer is cancer -- deluding yourself that it isn't, isn't a cure!
so Sebastian
i take it you are not going to accept my wager at 339 above except to call bs huh.
ok, but hey, do stick around on the blog over the next few months cause i want to share the happy times with ya, ok?
btw..i'll argue with you and others but will not use abusive language at you or anyone else (except the FFOMC maybe
gday
Any chance the Fed Governors knew the jobs figures to be released this Friday when they were deliberating over the statement?
Inter-agency cooperation you mean? Does our government do that sort of thing?
Interesting a/h trading-
Skf-100000 future block at 99.40 at 4:10
PPT to the rescue
Wages aren't rising, House prices aren't rising. The 'inflation' is price increases. Yes, this combination decreases your standard of living - get used to it.
The Fed's hope is that the commodities prices rises are mainly speculative, hoarding or temporary shortages and that without wage increases and with a sagging economy they cannot be sustained. Wishful, hopeful... whatever. Maybe the Fed is due for one break in this whole mess.
Andrew:
FWIW: On further reflection, I don't think this was a scam. They knew my credit limit and outstanding balance to the penny (I just called the automated Citi line to confirm the balance). If they could get that information, I'm guessing they could tap my credit on their own without my help.
Or maybe I'm just not cynical enough, and there's an angle I haven't thought of yet.
Angry Saver
I'm with you. Except I think you got it a little bit wrong.
The Fed and the Shrub administration are not just against the bottom 4 quintiles, they are against the bottom 9 deciles -- or worse.
Sebastian,
I have been preparing for a recession since Jul 2007 in our company. Trimming down excess costs, letting go of non-performers etc. Just because this blog has some people who are forseeing what is coming doesnt mean they're totally wrong and you are totally right. Even a non-interventionist economy has many moving parts and TIME is an important contextual measure. This is a consumer led recession compounded by an inflationary environment and is different than previous business recessions. If posters here continue to be wrong over the next 3 quarters, I will be the first to congratulate you. Better yet, I hope you are right and that we avoid a recession. Unfortunately I dont think you are.
Here's the money clause in the government's "real" GDP report.
The price index for gross domestic purchases, which measures prices paid by U.S. residents,
increased 3.5 percent in the first quarter, compared with an increase of 3.7 percent in the fourth.
Excluding food and energy prices, the price index for gross domestic purchases increased 2.2 percent in
the first quarter, compared with an increase of 2.3 percent in the fourth. About 0.3 percentage point of
the first-quarter increase in the index was accounted for by the pay raise for federal civilian and military
personnel, which is treated as an increase in the prices of employee services purchased by the federal
government.
So if you accept that then ok - real GDP grew by 0.6%. If you think inflation is higher (I suggest you read and subscribe to http://www.shadowstats.com) then we had a contraction. Personally our business did see a slowdown from Q1 of 2007 in terms of sales but by being proactive in planning we were able to keep our profitability at same or slightly better levels.
Of real concern to me are Food prices in 2008. Many, many people are going to suffer. If you have never had the opportunity to starve or fast for a couple of days - I recommend you try it immediately. Its good for your soul.
Wally,
Commodity price increases are definitely being influenced by speculation & hoarding. But some of that is well founded. We have negative real interest rates, a 150 billion stimulus package, never ending wars, massive federal deficit spending and bailout plans being proposed on a daily basis.
I won't even mention the trillions in unfunded future liabilities.
Until recently, Canada was running budget surpluses.
Angry Saver | 04.30.08 - 3:51 pm | #
Then they went and elected a W clone (Steve Harper)
Noble-
Seb won't discuss valueable information such as that available from shadowstats.com, because he is a troll.
Marketwatch ticker withing last 10 minutes
Paulson: 'We're closer to end' of credit crunch
4:38 PM ET, Apr 30, 2008
02. Paulson continues to urge financial firms to raise capital
4:37 PM ET, Apr 30, 2008
03. Paulson sees 'more bumps in road' for financial markets
4:36 PM ET, Apr 30, 2008
can you say contradiction..
I've been screaming "no recession" here every quarter since Q1 2007, every quarter there's not a recession, and the bears are always making excuses. It's always going to be the next quarter, or inflation is understated, the government is lying or whatever.
One poster just today called me the dumbest son of a bitch on the planet, for being right!
WFC
CD it looks like he is trying to cover all bases as well as his butt. Warn people without causing panic and keeping his "credibility" intact. He in esssence did a "Bernanke"
The worst part about the fed's rate cutting is that it hasn't even lowered mortgage rates. Same thing with muni's & corporate bonds.
This is a bank bailout. Higher costs for all except interbank borrowing.
Until the Fed signals a pause in the growth of M3 the rest is just more lipstick and a new dress for Mortcia.
IMO the inflation expectations pig has passed through the snake and is running wild. Bernanke has said that expectations not actual inflation were his concern. The grocery and gas station are winning the minds of the populace.
Sebastian,
I believe somebody called out your inane comment about the Fed (you claimed that they have no more information than we do)...
And then you steered the conversation to your unwavering no-recession call.
Your comment about the Fed was truly wacko. Yet you neither defended it, nor retracted it. So why get so indignant about how you are treated here?
Tim,
It's like he's living right on the border of mission, soma and castro districts? What say u Mr. Paulson?
For a fellow bay area commenter!
I like mock turtle, but someone need's to give him a helping hand out of the gutter.It's a strong force, and he needs more than one hand.
"Sebastian ...
Your comment about the Fed was truly wacko. Yet you neither defended it, nor retracted it. So why get so indignant about how you are treated here?"
Because he's a troll. Never forget that.
He may or may not believe what he's saying, but it's really all about keeping the argument going. And when that's your top priority, the validity of the argument is secondary.
CR / Tanta - I'm looking forward to what the Mortgage Pig has to say.
Like Poland in 1939, might the Fed be out of ammo?
Just wait 9 months. I am confident that the new administration will have no difficulty identifying the start (and end) of any recession well within the confines of the Bush Administration.
giacutter | 04.30.08 - 4:19 pm | #
Sort of like Bush did with the last recession, which incidentally started according to the NBER 2 months AFTER he took office.
Seb,
It's good to have you here..I disagree with your take but it's always good to look everyway possible before moving thru a stop sign, even straight ahead..
that's the first time I've seen mp not zen like! of course maybe he's tired of fed, sec, irs, govt, white house, rating companies due everything possible to ruin the future of our youth.
Frankly I'm tired of it too....
10 years left before Nicaragua retirement...
I've noticed more & more companies blaming their earnings shortfalls on rising prices. Just wait for the clamor when workers start losing their jobs due to inflation.
"The point is the interest rate is higher for a reason. Hot money flows send torrents of money into these economies without pricing in the risk. In fact they tend to do the opposite -- they price out the risk and then go one step further and invert it"
Agreed, we don't have the only casino on the strip.
I'd like to nominate this post as top5 of the week.
byzantine_ruins writes:
Pardon me while I do this. I don't know if this is too much troll feeding.
My point is, it seems that those who predicted a Q1'08 recession are questioning the GDP calculation now but not before.
Modern Republican-style arguing technique:
Make a bold assertion that takes 10 seconds but forces your enemy to riffle through reams of minutia to "prove" that you were wrong.
The best part is, the person making the assertion gets to grade your results, and the grade is always failing.
You are automatically on the defensive and they have to concede to validate you. So for phase 2, when an answer is produced, move the goalposts in some fashion, or attack your enemy as "obviously justifying" because they produce an answer that is given in anything but precise, prescient foreknowledge of your question.
GDP calculation has never been perfect, even Econ101 students know that.
When you must concede, minimize the degree to which it matters. Yes, everyone knows its imprecise. Why is it imprecise? Because of political pressure. Also taught in Econ 101.
Let's not talk about that, though, let's just talk about how it's no big deal that you are in essence conceding the central point so you can prove him "wrong" when you assay whatever minutia is presented to you.
But the timing and the people who question the calculation (like Roubini) is definitely making me raise the red flag.
Another GOPer technique. Blame instantly, usually in a way that seems to taint the individuals. If possible, bring up some known past moral shortcoming or other mistake. If not possible, just use a condescending tone as if their failures are well known, and make sure you name someone who your allies know has been singled out as an enemy of the Movement.
In answer, we're not questioning it -- any more than you conceded we are correct to as people who got through Econ 101 or the equivalent professional experience.
The deflator was manipulated to conceal crucial commodity inflation, which was done to flatter the administration. You admit everyone who knows anything about this knows it happens. Tell me again how we are going out on a limb here, you-who-are-swift-with-accusations, I must have missed it during the rhetorical slight of hand.
The fact is, I think that inflation has been under-reported all along. It was concealed during the boom to mask the fact that this run-up didn't just fall out of the sky like a freshly-minted similie. Growth has been over-reported as real prices have been spiraling upwards for years now. It is concealed now to keep real growth positive.
It's unfortunate that most of you GOPer-types use these tactics. You have too much interest in the argument, not enough interest in the facts.
This is pose to you: 2.6% real inflation. Let's stop arguing about notional lacks-of-argument in the past, and you start explaining to me that you think the real economy I am experiencing on a day to day basis is experiencing only a 2.6% annual price climb. Bring out some data sets that show we are wrong and these data are reliable under these circumstances. After you have put some shoeleather in and created whole and concrete arguments, maybe someone will refute you.
byzantine_ruins | Homepage | 04.30.08 - 11:15 am |
Manufacturing execs downright gloomy about coming year. Barely one in ten upbeat about the U.S. economy
April 29, 2008
(Reuters)U.S. manufacturers are much more pessimistic about the U.S. economy and the direction of their businesses than they were three months ago, according to a quarterly survey of senior industrial executives released Tuesday.
Only 12% of manufacturing executives said they are optimistic about the U.S. economy over the next 12 months, according to the PricewaterhouseCoopers Manufacturing Barometer, while 36% said they are uncertain............
More than half cited energy prices, lack of demand, and the weak U.S. dollar as barriers to growth. Falling profitability and regulatory pressures were also among top concerns.
The proportion of those who cite capital constraints as a barrier to growth more than doubled, to 32% from 15% last quarter. The shift in part reflects less free cash flow from operations
That compares with 29% who said they were optimistic in the fourth quarter, and is down from 57% a year ago. Among a control group of executives in other sectors, 18% were optimistic and 39% not sure.
Optimism about the world economy is also waning, according to the survey. About 38% of respondents said they are optimistic, down from 64% a quarter ago and 83% in the first quarter of 2007.
Interesting Times writes:
CR / Tanta - I'm looking forward to what the Mortgage Pig has to say.
Mortgage Pig is afraid Pig is guest of honor at next Fed meeting in Hawaii.
CR says> It appears the Fed believes the downside risks to growth have diminished and the inflation concerns remain about the same.
They omitted information.
One could conclude it diminished.
Or one could conclude it's getting worse, but they don't want to say it.
I forgot the link for the above article. My bad.
REG - Financial Week
"One poster just today called me the dumbest son of a bitch on the planet,"
What he said...
Ny Fed Dynamic mortgage map..
Best thing they have come up with this year...
US Credit Conditions - Federal Reserve Bank of New York
wachovia guidlines-check out pdf at end..
The Mortgage Lender Implode-O-Meter News Pick-ups: Wachovia's hidden 'Watch Market Area' Guidelines
http://ml-implode.com/info/Watch%20Market.pdf
Urp....
SAN FRANCISCO (MarketWatch) -- Centex Corp. late Wednesday reported it swung to a fiscal fourth-quarter loss of $910.5 million, or $7.36 a share, from a net income of $198.9 million, or $1.65 a share, a year ago. The loss from continuing operations for the fourth quarter was $7.34 a share. Revenue slid to $2.31 billion from $3.64 billion in the year-ago period, said the Dallas-based home builder. Analysts polled by FactSet Research had expected a loss of $2.14 a share on revenue of $2.09 billion. Home closings during the period decreased 33% to 7,100 homes and average sales price slid 15% to $267,953.
Centex swings to loss in fiscal fourth quarter - MarketWatch
They beat on revenues; I suppose my short position is going to get pounded tomorrow.
Jeez.
Friends asked that I meet with their financial planner this PM when they were there. God, I feel old. Early 30-something MBA/Lawyer with starched shirt and all of the looks.
He thinks that the market is in a great condition to buy and that they should continue to plunk $ into the growth funds. After all, so much of the money was made in the first 6 months after the '87 stock crash. Also told them to keep their eldest kid's college funds in a 70/30 stock/bond fund until he's ready for it next year.
And hey, it's not a recession since it came in today at .6% GDP. With the Fed cut of quarter point, things are really looking up.
Yes, I'm going to give them my real thoughts this evening. What an assclown.
labor markets have softened further
Employment report on Friday. Hmmmmmmm.
Was it fee only or commission based financial planer? (there is a notable difference)
Thought the strategic reserve was for TEMPORARY bumps. This don't feel temporary. Peak Oil, anyone? Is $200 a barrel so bad then?
Twas me, KnotRP.
Warsh was talking about raising rates then votes for a cut? Blowing one's credibility to jawbone the USD up 3 cents is a rookie move.
Starched shirt, oh no! Of all the reasons not to like somebody and their chosen profession, dressing like a professional at work has got to be pretty low on the list.
What he said...
barely | 04.30.08 - 5:37 pm | #
Not cool, man!
Seb clearly runs a close second to Doug Feith
Next fed report should be less wordy and more accurate.
I suggest "we are screwed."
Its concise, accurate and since its bad news, the stock market will go through the roof. GM posted a "smaller loss than expected" and their stock goes up 10%!
"on the planet"?
Who knows 6.1 billion people? I don't believe it.
Well, at least 2 voting FOMC members can sleep tonight.
g'nite, Ben. Pleasant dreams. If you can't sleep, count barrels.
Anyone that thinks this is the end of the rate cuts is nuts, the US is headed right down the Japanese rabbit hole with a lot of assistance from FED policies but that's all they know.
The only reason to put a knot around your neck in the morning, is if you are selling something.
O-Joe:A sell-off after the FED announcement tends to be followed by strong uptrends two weeks out (after another day or two of sell-off).
Are you sure? The last sell-off after the FED announcement that I remember was in December. And that portended an extremely steady decline through the first part of Jan, until the emergency rate cut/stick save.
What FED announcement stick save are you looking at?
I don't see the pause language in their statement, and I don't think the market did either. Gold mining stocks were up as were the commodities. I guess you can read whatever you want into it, but I was under the impression that BB would avoid using such arcane language as Greenspan. And if he was signalling a pause, he sure didn't come out and say it. Sure, with rates at 2% you'd think they would pause.
Regardless of the language, we have seen the Bernanke put exercised a few times since last summer. I have no reason to doubt that they will cut rates again if the market starts to tank...especially on an expiration Friday at 2pm Eastern time. He has plenty of bullets left before November. After that, he doesn't care and will probably resign to spend more time in another country.
A sell-off after the FED announcement tends to be followed by strong uptrends two weeks out (after another day or two of sell-off).
O-Joe
Optimistic-Joe | 04.30.08 - 4:33 pm |
You could be right in the short-term. All I know is that the market is now lower after all these rate cuts than when the Fed began this back in September of last year. (It's about the same level as September of 1999 for that matter.) That 1405 level on the S&P is very stiff resistance.
Starched shirt, oh no! Of all the reasons not to like somebody and their chosen profession, dressing like a professional at work has got to be pretty low on the list.
JLR | 04.30.08 - 6:15 pm
I used to do the corporate gig, too.
But what this guy was saying was straight from the sales playbook, so the whole outfit struck me as empty.
My mom's FP also dresses to the nines, but he's older and has lived through the '70s investment world, the '87 crash and the dotcom bust.
And he doesn't give her the playbook.
Homedad43 said: "He thinks that the market is in a great condition to buy and that they should continue to plunk $ into the growth funds."
Some people are either ignorant or have no conscience. Possibly both.
LOL! This is from the comments section at The Big Picture.
I guess the move today is the Fed's way of signaling that oil is still too cheap.
Posted by: Winston Munn | Apr 30, 2008 6:30:55 PM
Ben is doing everything he can to chase money out of safer investments into the casino. Real rates are now negative by 2% at least, killing seniors living off of interest on savings.
Sleep well Ben. Someone in America will be eating catfood because of you.
I read the fed's message this way:
"Recent information indicates that economic activity remains weak. Household and business spending has been subdued and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters"
= Translation: the economy, the financial markets are skating on thin ice...and the heat is still on.
"Although readings on core inflation have improved somewhat, energy and other commodity prices have increased, and some indicators of inflation expectations have risen in recent months. The Committee expects inflation to moderate in coming quarters, reflecting a projected leveling-out of energy and other commodity prices and an easing of pressures on resource utilization. Still, uncertainty about the inflation outlook remains high. It will be necessary to continue to monitor inflation developments carefully."
= Translation: Sally is getting over the flu but Paul is not recovering as well, and has shown signs of pneumonia. Due to his background of chronic bronchitis his condition will have to be monitored closely, as far as we can see.
Basically, no change.
barely writes:
Ben is doing everything he can to chase money out of safer investments into the casino. Real rates are now negative by 2% at least, killing seniors living off of interest on savings.
Sleep well Ben. Someone in America will be eating catfood because of you.
barely | 04.30.08 - 7:01 pm | #
Great post barely. How is mom in law doing? still going out wit dat UBS broker?
Bernanke is money printing hyperinflator nut.
Please fire this guy now. The guy is clueless. Most of on this board saw this tsunami hitting 2-3 years ago but this dufus did not see a thing but bailouts and handouts.
Bernnake punishes the savers and prudent first again like greenscum
Noble said: "...I have been preparing for a recession since Jul 2007 in our company..."
Positioning yourself better no matter what comes, right? And if no recession comes, you'll do well?
This is a subtle point that I think so many posters here miss. People that are standing on the railroad tracks and worry that a train is headed their way get off the tracks, they don't just stand there until a train comes along and hits them. As you have wisely done.
Me, too. For example, I got a "piggy-back" interest-only HELOC when I refinanced my house a few years ago. But I didn't just pay the interest, I made regular payments against the principal, too, and now it's nearly paid off. I've cut back on credit-card spending and have been aggressively paying-down that, too.
Responsible, far-sighted actions like we've taken leave us better off no matter what, but especially in an ongoing economic expansion.
Noble then said: "So if you accept that then ok - real GDP grew by 0.6%. If you think inflation is higher (I suggest you read and subscribe to http://www.shadowstats.com) then we had a contraction...."
Actually, I don't accept that. I measure GDP year-over-year. In Q4 2007, real GDP grew by 2.46% over Q4 2006. In this past quarter, Q1 2008, real GDP grew by a matching 2.46% over Q1 2007. If you were to get the real GDP data over the past few decades and calculate it out this way, you'd see that this is a comfortable distance from a recessionary number and the economy didn't simply eke out a fractional gain.
As to Shadow Stats, their numbers are of no use to me, or to anyone, IMO. You can't change one economic indicator in isolation and compare it to another indicator that hasn't also been appropriately adapted. Not if you truly want to be intellectually honest about what you're doing, anyway.
I'm proving that it's possible to make educated economic forecasts using existing, un-altered data. I believe I'll be able to continue to do that.
Sebastia
Bernanke and greenscum believe they can eliminate recessions by printing.
recessions are good way to clean out the excesses which are never allowed to correct.
Fire bernanke now.
Sebastian said:"Me, too. For example, I got a "piggy-back" interest-only HELOC when I refinanced my house a few years ago. But I didn't just pay the interest, I made regular payments against the principal, too, and now it's nearly paid off. I've cut back on credit-card spending and have been aggressively paying-down that, too."
Why not pay cc debt first? heloc interest rate should be lower plus the interest is tax deductible
A lot of the complaining about GDP deflator reflects ignorance what the thing is. If you don't know what GDP is, and how it is calculated, don't expect the data to make any sense.
GDP is a measure of domestic production (or income - there's two ways at getting to the number). Imports represent a drag on domestic income: the goods are produced outside, but they consume income here. They enter the GDP equation with a negative sign (i.e., they are subtracted).
So what? Well that means that imports are in "bizarro world" (to quote a popular phrase here). Imports have a negative sign where they appear in equations (relative to other components) - and that means that RISING IMPORT PRICES DEPRESSS THE FREAKING GDP DEFLATOR.
Yes, that's right - the explosion in crude oil import prices is pushing down the deflator, increasing real growth.
That's crazy, but that's what the bloody equations say has to happen, so deal with it.
In the long term, it should wash out - rising energy product prices will push the deflator back up. But in the short term, it means you have to be very careful in interpreting the short-term swings in GDP data.
Amazingly enough, the NBER (the people who date recessions) know some macroeconomics, and know that the GDP number can be misleading. For that reason, a recession is NOT defined by shrinking GDP. (Hint to anyone who believes Sebastien's nonsense: he's wrong. The recession started last year. All that remains is for the NBER to pronounce.)
And for those of you spluttering in rage about this: get a grip. The markets ignore the GDP report, for precisely this sort of problem. (The equity market may not, but that's probably because equity investors tend to be somewhat, um, "reality challenged".)
i love bond guys.
hey bond guy-
When is the bond market going to say "enough-is-enough" to contaminating the Fed/US Treasury with dicey paper via TSLF, BSC Bailout, etc? Am I missing something about why this is "OK"?
Also, when is the deficit going to become "unmanageable" in the eyes of the bond market?
Ever?
CD what's up. Glad to hear from someone in the Bay area.
"hey bond guy-
When is the bond market going to say "enough-is-enough" to contaminating the Fed/US Treasury with dicey paper via TSLF, BSC Bailout, etc? Am I missing something about why this is "OK"?
Also, when is the deficit going to become "unmanageable" in the eyes of the bond market?
Ever?"
Japan has shown the problem with relating deficits to interest rates - biggest debt outstanding, lowest rates. In a recession, nobody worries about rising deficits. Problems will show up only if central banks get antsy, or during an up-cycle.
With regards to TSLF, we have enough other credit worries with other entities; no time to analyze the Fed's balance sheet. Hey, they're AAA, right?
bond guy, I wish you had posted that at the start of this thread: you might have saved us from some considerable amount of mistaken argument. Do join in more! THX!
Amazing that there are people out there claiming no disaster has happened or will happen because the government figures say so. Whatever, guys! Have a chit-chat with the people losing their homes and jobs, or the people who can barely afford food and gas thanks to our "inflation is contained" Fed and the rest of the crooks.
The disaster is slow moving, but it IS happening, and the people in charge will deny it to the bitter end. We, the realists, have already pointed out how cooked the numbers are ranging from the assorted "creative" ways to measure inflation, unemployment, etc. to the obviously fake inflation deflator used for this past quarter's GDP number. Yet the bulls claim "all is well!" because the official numbers say so. Yeah, because people in power ALWAYS tell the truth - right!
Tim, Live in east bay..How bout yourself? I too think your fed=banker call is correct!
Interesting times we live in!
Sobering assessment of risks to US economy
By Krishna Guha in Washington
FT.com / US / Economy & Fed - Sobering assessment of risks to US economy
published: April 30 2008 23:00 | Last updated: April 30 2008 23:00
Wednesdays message from the Federal Reserve was not a firm one-and-done as many in the markets thought it would be. The US central bank made clear that it would like to pause in June, but it is not certain that Wednesdays quarter-point rate cut marks the end of the easing cycle.
Nor did the Fed train its guns on inflation and target the link between expected interest rates, the dollar and commodity prices, as a growing number of experts suggested it should.
Instead it only lightly altered its evaluation of the respective risks to growth and inflation from mid-March, leaving an implicit bias towards growth risks even as it dropped its explicit bias.
Indeed, if anything the Fed had more positive changes to make on inflation risk than on growth.
This suggests that while the US central bank is inclined to pause in June, the market needs to rethink the nature and purpose of this plan.
The Fed does not think the risks to growth have fallen sharply and the risks to inflation are mounting. It thinks the risks to growth are largely unchanged and the risks to inflation have not increased.
The assessment of growth risks in the statement is sobering.
The Fed is worried about consumer spending, business spending, stressed financial markets, still tight credit conditions and a deepening housing contraction above all, accelerating house price declines.
However, it does believe that it has already done a lot to fight these risks, through substantial easing of monetary policy 325 basis points of rate cuts since August and liquidity support operations.
The logic of the Feds pre-emptive rate cut strategy is that at some point it should be able to take time out to assess unfolding economic weakness, rather than keep cutting in tandem with weak data.
Monetary policy works with a lag, and many policymakers think the big cuts already made will start to boost growth from the middle of this year onwards, reinforcing the impact of tax rebates.
This will be particularly the case if market healing spreads, reducing the impediments to the transmission of monetary policy.
Yet it is unclear how powerful the lagged effects of past rate cuts will be, given the offset from higher risk spreads and market strains.
Financial conditions are tighter now than last August, on some measures.
The Fed would like to pause to evaluate how the economy performs around midyear, how strong the boost from fiscal and monetary policy is, and how likely it is that the economy will weaken again as the impact of the fiscal stimulus fades the W-shaped downturn scenario.
It also wants to allow time to judge how much support monetary policy is likely to get from fiscal initiatives including targeted intervention in the housing market.
Fed officials would like to see a shift in the so-called policy mix to take the burden of fighting the credit crisis away from monetary policy, but are not sure to what extent this will materialise.
Above all, the Fed wants to see if there is any sign around mid-year that falls in house prices are likely to slow an essential ingredient for any recovery.
So a pause makes sense, even given the Feds economic outlook.
As the reference to ongoing liquidity support in the statement implies, it could continue to expand these efforts while keeping rates on hold.
If financial markets continue to heal, the economy avoids a slide into full-blown recession, the US consumer holds up and house price declines start to slow, this initially dovish pause would evolve into a more hawkish stance, and ultimately rate increases.
However, the Fed is not 100 per cent certain it will have the luxury of pausing.
Even if it does, investors should be alive to the possibility that the next change after that could still be down, not up.